The single European currency has started the new week in environment of mild reaction, having so far defended 1,17 level.
The European currency lost significant ground after the highs of 1,1920, which it climbed in the wake of the Fed’s decision to reduce key interest rates by 25 basis points on last Wednesday .
The correction in which the exchange rate fell confirmed my view on positioning in favor of the US currency at some new peak and before the 1.20 level, but also maintaining this position as, as I had mentioned in the previous article, there was room for further correction.
The Fed’s decision was fully expected, but many investors probably expected Chairman Powell to be clearer about the next moves, with bets currently on a 50 basis point cut by the end of the year.
The labor market in the United States and the possible deterioration in the issue of trade tariffs after the temporary agreements that have been reached remain the main reasons for concern and very high on investors’ agenda.
At the same time, the geopolitical environment, especially closer to the European continent, continues to be a concern, with the situation in France and the ongoing war in Ukraine remaining potential sources of significant risk.
The behavior of the exchange rate shows that investors are trying to ”play” more on the weakness of the US dollar despite the fact that the European currency is strong and that there are fundamental very important issues that would justify an exchange rate at levels well above 1,20.
On today’s agenda, consumer confidence in the eurozone and several statements by Fed officials from the other side of the Atlantic stand out.
After my position in favor of the US currency at the recent peak, I would prefer to lock in some profits and remain in a wait-and-see position as the correction has already approached 200 basis points and although there is room for further, I would prefer to remain out.
