Synopsis:

ING anticipates that EUR/USD will rebound above 1.11 if the upcoming US jobs report shows weakness. Despite broader concerns about pro-cyclical currencies, the euro is expected to outperform higher-beta currencies in a risk-off environment.

Key Points:

1. US Jobs Report Impact:

   • Expectations: ING expects EUR/USD to climb above 1.11 if the US jobs report on Friday is weaker than anticipated.
   • Reasoning: A softer US macroeconomic environment could negatively impact higher-beta currencies like AUD/USD and NZD/USD. However, the euro is seen as a more resilient currency due to favorable liquidity conditions in a risk-off scenario.

2. Currency Preferences:

   • Comparison: While JPY and CHF are preferred in a weaker US macro environment, the euro is anticipated to benefit from its defensive characteristics.
   • EUR/USD Outlook: ING predicts that EUR/USD will hold above 1.1000 leading into US ISM services data and Friday’s payrolls. A soft payroll report could drive the pair above 1.110 by week’s end.

3. Broader Context:

   • Pro-Cyclical Currencies: Pro-cyclical currencies are expected to struggle more in the current environment compared to the euro, which is anticipated to fare better given its liquidity and defensive attributes.

Conclusion:

ING forecasts that EUR/USD will rise above 1.11 if the US jobs report shows weakness, with the euro benefiting from its defensive qualities in a risk-off environment.