EUR/USD: Dollar looking increasingly vulnerable – MUFG

Analysts at MUFG Bank point out the US dollar failed to benefit from stronger employment data in light of the Federal Reserve’s high hurdle for rate hikes.

Key Quotes:

“The USD appears increasingly vulnerable to a more marked correction lower in the near-term. USD weakness is becoming more broad-based with even EUR/USD threatening to break higher above the 1.1000 to 1.1200 range that has held since mid-year”

“The USD failed to derive upward momentum on the back of the blowout US employment report for November. The Fed’s stronger commitment to keep rates on hold through next year until there is a significant and sustained pick-up in inflation has weighed on the USD and further encouraged an improvement in global investor risk sentiment. At the same time, the sharp increase in the ZEW expectations component has reinforced optimism over the outlook for the eurozone economy heading into 2020.”

“While hard economic data remain disappointing so far in Q4, the improving leading indicators are signalling growth is set to strengthen next year and encourage a stronger euro even if the ECB remain committed to looser policy for longer. A US-China phase one trade deal and positive UK election outcome also play into a higher EUR/USD.”