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jobs data this week and ECB and Fed meetings next week may lead to interest rate moves that drive EUR/USD to a new low for the year.
President Donald Trump's criticism of the Fed's boss and its rate hikes in August put a 10-bp dent in the interest rate differentials supporting the EUR/USD downtrend.
Bond traders have already unwound half that move before the U.S. jobs report this week, and with solid payroll gains forecast and the jobless rate expected to fall back to a multi-year low at 3.8 percent, the data should support further Fed tightening.
Markets are pricing in fewer hikes than the Fed, so changes in rates should support the dollar.
Where the Fed is expected to hike 25bps again on Sept.
26, the negative influence of the trade dispute with the U.S. and uncertainty over Italy's budget may well temper some ECB hawks.
A 7-bp widening of US/German benchmark yields would be the widest for rates since 1990.
New EUR/USD lows could result.
US/German rates and EUR/USD Click here