FXStreet (Delhi) – Research Team at BNP Paribas, notes that the risk environment again looms large over FX markets, with a nearly 2% drop in the S&P 500 and now the Nikkei 225 Index down 560 points this morning coinciding with gains in FX funders and losses in EM currencies. Key Quotes “Against this backdrop, USDJPY fell back below 120 and has now retraced about half of its post-BOJ easing gains, while the 2-year Treasury yield fell below 75bp for the first time since October. Rates markets now no longer fully price even one tightening in 2016, suggesting that the financial market and data backdrop will be too weak to allow the Fed to continue with its gradual tightening plans. However, a stabilization in financial markets coupled with an accumulation of even moderately improving US data flow would likely force markets to quickly rebuild Fed pricing, and we think risks remain skewed to the upside for the USD accordingly. Today we expect a below-consensus reading on the ADP payroll report and the ISM services report could also signal some slowing in job creation in its employment sub-component. However, while we expect payroll growth to have slowed to 175k in Friday’s official jobs report, we also look for a new cycle low in the jobless rate and a rebound in average earnings. We remain short EURUSD and, via derivatives recommendations, long USDCHF and USDJPY.” For more information, read our latest forex news.