Downside risks for EUR/USD rise

Improved economic data and a somewhat stronger inflation pressure have for now dispelled the fears of a recession in the US that had temporarily dominated the markets. Today's NFP employment report turned positive, increasing expectations on rate hikes by the Fed, which should provide tailwinds for the USD.

On the other side, growth and inflation expectations have deteriorated considerably in the euro area raising the likelihood that the ECB will decide a comprehensive package of measures next Thursday. If the ECB along with a rate cut introduces a tiered interest rate or completely exempts a part of excess reserves from the negative interest rate, the EUR should come under stronger pressure.

"Investors are again betting on more divergence between the Fed and ECB's monetary policies and therefore on an elevated "crash risk" in EUR-USD." said Commerzbank in a report.