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.”