Rabobank - "Central bankers and US payrolls data appeared to leave the outlook for EUR/USD and GBP/USD cut and dried last week. Both the ECB and BoE were dovish while the better headline numbers within the US labour report has encouraged speculation of tapering of QE from the Fed as soon as September. Although there is little US data scheduled this week, investors will have the benefit of the minutes of the June FOMC meeting in addition to a speech from Fed President Bernanke later in the week. It is possible that the combination of these events will encourage speculation that tapering is almost upon us. Alternatively there is the possibility that Chairman Bernanke will push back against speculation that the Fed is ready to take a less accommodative position.
(...) The possibility that Bernanke or other Fed doves push back against the perception that the US business cycle has moved significantly ahead of that in the Eurozone or the UK suggests there is scope for some profit-taking on long USD positions in the weeks ahead.
(...) Last month we revised higher our medium-term USD forecasts on the back of an improved US economic outlook. We maintain the view that the USD is currently in the process of bottoming after a period of weakness and expect that by year EUR/USD is likely to be pushing lower relative to current levels. That said, the pace of the downmove in EUR/USD is likely to be kept in check. Early last week the Eurozone peripheral bond markets demonstrated only limited contagion to the worrying political news from Portugal and they remain fairly calm despite talk that the troika could this week decide to delay a payment to Greece. This more self-confident note within EMU suggests a certain degree of EUR resilience lays ahead and this indicates that the pace of any medium-term move lower in EUR/USD is likely to be moderated."