The single European currency remains in a tight range near the 1.09 level for a third day in a row as last Monday markets turmoil has faded.
The questioning of the American currency mainly due to the large liquidation of positions against the Japanese yen but also the significant risks of a possible escalation on the front of the Middle East are slowly being removed from the table with the consequence that calm has returned to the international stock markets and the American dollar has stabilized near the levels of 1,09.
Yesterday’s data on weekly US jobless claims did not disappoint, balancing concerns about the deterioration in the labor sector seen recently in the US.
The bets for more aggressive policy by Fed in relation to the prospects of interest rate cuts have not changed significantly, with two cuts by the end of the year in a range between 75 and 100 basis points is the scenario that gathers most possibilities for now.
A corresponding policy without significant differences is expected to follow and the European Central Bank, as a result even with some small deviation the difference in interest rates in favor of the US currency is expected to remain on the table for the coming months.
The gap in the interest rate differential in favor of the American currency and the fragile economy of the eurozone remain the main weights in the effort of the European currency to develop a strong upward momentum easily breaking the critical levels of 1,10 – 1,12 to which it had climbed at the end of 2023.
Today’s agenda is relatively poor without any major announcement with the biggest risks remaining at the geopolitical area.
Barring any major last-minute surprises, the exchange rate is expected to remain within a limited range as the most likely scenario is that investors will avoid taking large bets on the last day of the week.
There is no change in my thoughts as they have been expressed in previous articles, remaining for the time being on hold.
