The single European currency continues to be under mild pressures having slipped below the crucial 1,09 level, with possible further challenges remaining on the table.
Yesterday without giving any significant surprise as the agenda was extremely poor due to Columbus day in US maintained the mood in favor of the American currency as the euro apart from small range reactions it seems hard to return to some strong upward momentum at the moment.
The interest of investors remains fully focused on the prospect of a reduction in interest rates from Fed and ECB as the range in the interest rate gap will largely determine the course of the exchange rate.
At the moment, bets on another 50 basis point cut from the Fed are close to zero as the latest US inflation data and a rebound in the labor sector have restored optimism on the other side of the Atlantic.
At the same time, geopolitical concerns remain high on the agenda, which supports the US dollar, which traditionally functions as a safe haven currency.
On the concerns over the Μiddle Εast front and a possible escalation adds the developments between China and Taiwan that could ignite a new front of geopolitical tensions.
Ιn such an environment and with concerns about the course of the European economy remaining high, restoring the European currency a strong upward momentum is certainly a challenge.
Today’s agenda is considerably more interesting than yesterday’s, with the Industrial Production Index and ZEW’s Institute survey for Economic Sentiment in eurozone stand out.
While on the other side of the Atlantic several Fed members are expected to have statements which could lead to fresh conclusions about Fed’s outlook.
No changes in my thoughts. I remain on hold and my attention is now focused on the prospect of buying the European currency, maybe near to the 1.08 level as the US currency’s recent rally may be showing signs of fatigue.
