Μild losses for the single European currency in early trading on Wednesday as signs of fatigue that have emerged over the past three days remain on the table.
Τhe European currency is fighting to defend the level of 1,1150 which has temporarily lost it.
Yesterday did not provide any surprises and all the announcements were close to the estimates with the result that the exchange rate was limited to a narrow fluctuation range as investors avoided big bets.
The overall market’s picture has not changed and remains as it has been for the past few days with bets on the prospect of a rate cut by the Fed in September monopolizing interest.
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, I believe that 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 is extremely poor without anything of note that could support the scenario of a narrow trading range for the second day in a row.
Although the risk of the further rise of the euro and the breakdown of the 1,12 level is in the game, I will remain in my thoughts for the time being maintaining a position in favor of the US dollar from the 1,12 levels as I have mentioned in a previous article.
