EUR/USD to tank towards the 1.10 level, DXY to reach 97.00 – MUFG
All eyes are on the participation rate of the November jobs report from the US as this will help the Federal Reserve to assess wage inflation pressures. In any case, economists at MUFG Bank expect the US dollar to strengthen following the release of Nonfarm Payrolls data.
Wage inflation risks are key for the Fed and the US dollar
“The pandemic has basically seen 3M people leave the labour market. If and/or when these missing 3M people return to the market will be key in determining wage inflation pressures and will be important for the Fed’s view on medium-term inflation risks.”
“Whatever the outcome in today’s report is, the Fed has been left surprised and will likely push on with confirming a faster taper which we expect will result in USD crosses reverting back to pre-Omicron levels close to 97.00 on DXY. EUR/USD is likely to grind lower toward the 1.1000 level.”
See – NFP Preview: Forecasts from 10 major banks, strong print to reinforce Fed's recent hawkish pivot
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