EUR/USD is trying to make headway above 1.0850. Economists at Société Générale analyze the pair’s outlook.

How far EUR/USD advance may depend on the ISM services and NFP 

Slowing US employment growth on Friday may outweigh Powell’s testimony and the ECB decision and could give EUR/USD another chance to have a go at 1.0900.

Upside momentum for the Dollar stalled last week and another run of profit-taking could follow if services ISM and/or NFP fall short of expectations. This would draw a line under Fed repricing which has governed FX and EUR/USD since the start of the year.

For the ECB, there will be no change in policy on Thursday but the question that dominates is the new inflation forecast. If the projections are revised down and the ECB is reassured by the 4Q inflection point in wage growth, then market conviction would strengthen that a first rate cut could follow in June and precede a first reduction in the US. This could take the gloss off recent gains for EUR/CHF, EUR/JPY and snuff out rebound in EUR/GBP from the February lows.