The euro treaded water in European session tonight ahead of US Non Farm Payrolls trading within one of the tightest ranges in months. The unit came under temporary pressure as EU Industrial Production slowed a bit more that anticipated declining  -0.4%  on a month over month basis versus expectations of -0.3%. On a year over year comparison however, Industrial Production jumped 4.7% indicating that demand remains healthy.

With all eyes on US NFP's at 13:30 GMT we pass on an observation from our colleague Andy Busch from Nesbitt Burns that President Bush's trip to Chicago today to talk about the economy could be an indication that the number will print to the upside. The thinking goes that Mr. Bush would not face a crowd unless he had good news to bring them.  While there is absolutely no proof that that is indeed the case, and all of this conjecture may simply be idle trader speculation, we've also noticed in the past that whenever Administration officials make themselves available for  early morning interviews on CNBC the NFP numbers tend to be strong.   

Assuming that the NFP's do not disappoint, the more interesting question is will they have much impact on the currency market? With most players anticipating 200K, a number only slightly higher than consensus is unlikely to provide much fuel to dollar bulls. However, if the figure exceeded 300K. the effect on the currency market may be substantial, as traders would have to reassess their present thesis that the Fed is nearly finished hiking rates. At 300K or above, 5% Fed funds rates becomes a serious possibility and as a result EUR/USD may head back to
below 1.2000 once again.

Boris Schlossberg is a Senior Currency Strategist at FXCM.