Halt the (Printing) Presses

A hint the Fed might taper QE programs later this year sparked a rebound in the USD dollar on Thursday. The yen was the best performer on the day while EUR and GBP lagged. The China services PMI is the lone item on the Asia-Pacific calendar.

The Dec 12 FOMC minutes sparked half-cent moves in the dollar. The minutes said several FOMC members wanted to end or scale back Fed bond purchases by the end of the year.

The moves knocked the euro out of its two-week range to 1.3050 and cable to 1.6100 after hitting a two-year high above 1.6381 yesterday. We warned about the potential for cable declines yesterday after the failure to break a long-term triple top.

Earlier euro and pound weakness came as a result of profit taking in EUR/JPY and GBP/JPY after the recent parabolic moves in those pairs.

The focus now shifts to non-farm payrolls on Friday. Analysts have been hiking forecasts after the ADP jobs report hit 215K compared to 133K forecast. That enthusiasm was tempered by jobless claims at 372K compared to 355K expected. The ‘consensus’ still reads 150K but the market is now likely priced for a reading around 170K.

In Asia, the highlight will be the Chinese services PMI from HSBC at 0145 GMT. The prior reading was 52.1. Japanese officials continued to talk down the yen overnight and say fighting deflation is their top priority.