Claims Improve, ISM Falls, No Hints from Draghi

The disjointed picture of the US economy is no clearer ahead of non-farm payrolls after mixed data on Thursday. The US dollar was the best performer on the day while NZD lagged. Expectations that the ECB will rescue the US economy were dealt a blow by Draghi.

After three disappointing readings, initial jobless claims improved to 365K compared to the 379K reading expected. On the other hand, the ISM non-manufacturing index fell to 53.5 compared to 55.3 expected. The employment component of the survey also deteriorated.

The euro fell below 1.31 for the first time in two weeks after the claims data but rebounded afterwards. The driver was a less-dovish than expected press conference from Draghi following the decision to leave rates unchanged. The ECB leader continued to stress downside risks to the economy but said inflation risks are broadly balanced and made no mention of rate cuts or extraordinary programs.

The initial reaction was a euro rally to 1.3180 but the lack of action also raised fears about European growth and EUR/USD drifted back to 1.3150. Other factors that jostled on the euro included rumours that Spain will announce a bad bank program on Friday and elections this weekend in Greece and France.

The short AUD/CAD trading idea that Ashraf introduced continued to perform well as the pair fell to a 5-month low before a drop in oil prices began to hurt the Canadian dollar.

The market is in a holding pattern ahead of non-farm payrolls and Japan remains on holiday but one release that may move markets in Asian trading is HSBCs China services PMI at 0230 GMT. The prior reading was 53.3.

-AB