USD Moves Up with NFP Estimates

Economists raised forecasts for Friday's non-farm payrolls report after upbeat ADP employment data on Wednesday. The pound beat out USD as the best performer while CAD lagged for a second day. Chinese CPI is the top item on the upcoming calendar.

ADP employment for December rose 238K compared to 200K expected. Afterwards, numerous economists raised their forecasts for Friday's non-farm payrolls report. The median is at 200K but market expectations have ticked higher.

A reading above 250K would spark speculation about an acceleration in tapering at the January or March FOMC meetings. In the FOMC minutes released Wed there was no indication of an appetite for anything other than a 'measured' pace in the reduction of asset purchases but that was before the Fed saw the sanguine market reaction to the taper.

The US dollar initially cheered the ADP release but the market was tentative to push the gains ahead of the BOE, ECB and non-farm payrolls. EUR/USD remains vulnerable to the downside but technical support at the 100dma at 1.3544 remains in place. The initial technical breakout in EUR/USD came on Friday after the 55dma gave out.

The Canadian dollar is quickly becoming the dog of 2014. The break yesterday extended to a 3-year extreme in USD/CAD at 1.0831. Up next is the 2010 high of 1.0853.

At 0130 GMT, China releases CPI and PPI data for December. Consumer prices are forecast to rise 2.7% y/y after a 3.0% rise in Nov. The PPI has been in negative territory since early 2012 and is expected to decline 1.3% y/y.