EUR/USD had a decent jump on the slightly softer-than-expected US jobs data on Friday. Yet unless US unemployment rises ‘meaningfully’, it will have to be the US price rather than the activity data, which determines the next big trend for the Fed and the dollar. As such, next week’s April US CPI data will probably be the next sizeable mover for global FX rates. Before then, the eurozone calendar is reasonably light, and the 2024 ECB easing cycle looks fairly priced at 75bp – our house call as well.

As we have mentioned before, we think 1.08 represents a medium-term fair value for EUR/USD – which probably suggests EUR/USD can trade in a 1.07-1.08 range for most of this week.

One downside risk to European currencies comes from tomorrow’s Riksbank’s policy meeting. Despite concerns over a softer currency, we think the Riksbank will cut. As we saw with the Swiss National Bank rate reduction in March, European rate cuts do add to the divergence theme and see European currencies underperform. This is an event risk for tomorrow.

Leave a Reply

Your email address will not be published. Required fields are marked *