EUR/USD a test of 1.0950 unlikely so far – Danske Bank

Senior Analyst at Danske Bank Pernille Henneberg sees a potential test of the mid-1.0900s as unlikely, even in the case of a strong Payrolls numbers.

Key Quotes

“The US dollar took a punch yesterday as the ISM manufacturing showed a sharp decline to 49.4 in August from 52.6 in July”.

“While the US economy mainly is driven by services, the weak ISM report probably has changed investors’ reaction function to the important US jobs report today as a strong report now still might leave uncertainty whether the Fed will hike or not”.

“The market is still pricing in a 30% probability of a September hike and so there is still some upside potential for higher US interest rates”.

“According to our short-term financial models, a 10bp widening of the US-EU two-year swap interest rate spread would (all else being equal) lead to a decline in EUR/USD to the magnitude of half a figure. Hence, if we get a strong report, EUR/USD might not break below the post-Brexit low of 1.0952 in this scenario”.