ECB Inflation Low, OPEC Sidelined

Draghi held back on the optimism and the ECB left inflation forecasts low Thursday, weighing on the euro. The yen was the top performer while the Australian dollar lagged. Japanese earnings data and services PMIs for China and Japan are due next.  A new Premium trade was issued on Thursday and is already 105 pips in the money.

Draghi held off any action or hints of action as he retained a wait-and-see stance but low inflation forecasts left the door open for more easing if the economy stumbles. HICP inflation was revised to 0.2% from 0.1% this year but was left unchanged at 1.3% for 2017 and was lowered to 1.6% from 1.8% in 2018. That's despite some better economic news and the rise in oil prices.

Draghi also emphasized downside risks once again. There may not be a need for new measures but expectations for an extension of QE buying should continue to grow and hurt the euro.

A separate meeting in Vienna of OPEC was also a disappointment to the bulls. Rumors of new output caps proved untrue as officials refrained from pledging anything. Oil initially fell more than $1 but once again bounced back in an affirmation of the rock solid bid that seems to ignore fundamentals.

The economic calendar featured the ADP employment numbers ahead of Friday's NFP results but there was little drama on the release as it hit the 173K consensus.

The yen retained a solid bid despite an improvement in stock markets throughout the day. The S&P 500 opened 10 points lower but finished +6 and at the highest closing level in 7 months. The 2016 intraday high of 2010 is just 5 points away and will be a level to watch after non-farm payrolls.

Looking ahead, the Japanese labor cash earnings report is due at 0000 GMT and expected to rise 0.9% y/y in a slowdown from the 1.5% pace in April. It's unlikely to be a market mover.

At 0145 GMT, the focus shifts to China with the Caixin services PMI for May. The prior was 51.8 and baring a big miss, it's unlikely to sway markets. A report in the China Securities Journal said officials may soon lift limits on stock futures margin trading and that could be a boon to Shanghai stocks.

The final one to watch is the May Nikkei Japan services PMI at 0200 GMT. The prior reading was 48.9.