Friday’s launch of the ‘good however not that good’ US Might labour knowledge confirmed an honest stage of enchancment within the US labour market, however not sufficient to spice up fears that the Fed ought to begin to taper its asset buy programme imminently. Whereas there could also be no urgent want for the Fed to taper, the controversy concerning the timing of any discount in QE is ready to stay a dominating market theme. Due to this fact, Jane Foley, Senior FX Strategist at Rabobank, expects the EUR/USD pair to plunge under 1.20 on a three-month view.
The Fed’s Jackson Gap Symposium in August may present the backdrop for a extra earnest dialogue on tapering
“It’s inevitable that the controversy over US inflation and Fed tapering will proceed to dominate market sentiment within the months forward. The restrained tone of final week’s US payrolls launch means that for now the USD may stay within the defensive.”
“Insofar as lots of good news is already priced in, flows into the EUR may very well be susceptible if the Fed does place extra emphasis on tapering afterward within the 12 months and bond yields edge larger accordingly.”
“With the problem of Fed tapering prone to stand up the agenda in some unspecified time in the future, we count on the USD to search out it footing later within the 12 months and for EUR/USD to maneuver again under EUR/USD 1.20 on a three-month view.”