EUR/USD: Fed rate cut priced in but NFP poses downside risk to the dollar – ING
|According to analysts at ING the main risk for the US Dollar next week is the potentially disapointing US jobs report rather that the fully-priced-in Fed rate cut. They see the EUR/USD pair with a mildly bullish bias for next week, trading in the 1.1040/1.1205 range.
Key Quotes:
"With the market fully pricing in the October Fed rate cut (Wednesday) and our view that the central bank is unlikely to pre-commit to a more meaningful cutting cycle (rather it should stick to its reactive approach/insurance cuts) the key dollar driver should be the US economic data. We look for a modestly above-consensus Q3 GDP (Wed), yet see a risk to the dollar stemming from the October US labour marker report (Fri). The non-farm payrolls are likely to dip (ING 70K vs market 95K) and disappoint due to the GM strike being a drag on the numbers. Such a figure would increase odds of further rate cuts (even if the Fed does not signal it) and weigh on the dollar.”
“In Europe, we should get another batch of uninspiring data. Both October core and headline eurozone CPI should come in at 1%, and 3Q GDP should stay at 0.2%QoQ (although there is a non-negligible risk of a 0.1% print). This means that European data won’t provide many reasons to be cheerful about the euro, but the downside risk to the US NFP suggests a neutral/modestly-positive bias for the cross.”
“We expect the 1.1200 level to act as a strong resistance. The fading Brexit 'optimism' also suggests lower upside to EUR/USD and European FX in general.”
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