The single European currency has retreated from the highs of 1,12 and is struggling to hold above 1,1150 level as the recent bullish momentum already since yesterday shows significant signs of fatigue.
Yesterday did not give any surprises and the macroeconomic data that was announced was close to the estimates.
The exchange rate continues to be driven almost entirely by bets on Fed and ECB rate cuts prospects.
Although several days have passed recent macroeconomic fundamentals on the fatigue of the US labor sector and a significant easing of inflationary pressures now give room to Fed to proceed with the first cut in key interest rates in many months by narrowing the interest rate gap between the euro and the dollar, something that has weighed heavily on the American currency in recent weeks.
Fed Chairman Jerome Powell’s speech at the Jackson Hole symposium on Friday significantly increased bets on Fed’s first interest rate cut in September.
However, as the dust from Powell’s rhetoric slowly settles, the speculation that has been built around the rate cut is expected to be limited, which is likely to limit further gains in the European currency and help the US currency to return to better prices.
Today’s agenda without being indifferent does not include anything very important with the growth rate of the German economy announced a little earlier without any surprise while later in the afternoon the consumer confidence index in US is expected.
I do not see any significant reason to change my thinking as it has been stated in previous articles and for now I maintain a position in favor of the US currency from 1,12 level.
