Danske Research discusses EUR/USD outlook and sees a scope for temporary spike towards 1.20 before turning lower.
"The payrolls released last Friday was, in our view, 'supposed to' cement an expectation to an announcement of tapering by September. However, coming in at just 250k versus 700k consensus, it was well off. But wage data accelerated. The key question is how to interpret the shortfall in jobs amid very noise wage data
Scenario 1) The US have hit full capacity? Scenario 2) The US is slowing down substantially? Scenario 3) The job shortfall was driven by temporary factors?," Danske notes.
"We, like markets, are discussing all of the above possibilities. Over the recent weeks, markets have postponed the expected start of tapering, length of tapering and first hike by around 1-3 months. That has helped to lift spot EUR/USD 2 figures. While we remain strategically very bullish dollar, the short-term sentiment can equally also include a roundtrip over 1.20 as markets move to price in something between scenario 1-3, though we lean towards scenario 3," Danske adds.