The single European currency remains on the defensive following yesterday’s meeting of the European Central Bank, which left interest rates unchanged as widely expected.
The small surprise that came with the announcement of a better growth rate in the American economy failed to give the US currency any further impetus.
President Lagarde brought nothing new to the table and all the messages and statements were fully expected without surprising the markets.
Τhe only significant message was that the decision to pause the rate hike cycle does not mean that it may not change in the future, depending on conditions, suggesting that although inflationary pressures show significant signs of abating, an unexpected reversal of the climate is likely to force the European Central Bank to change its thinking.
The course of the exchange rate was quite restrained during yesterday’s day and despite the flurry of announcements and economic news it could not take any concrete direction, confirming that although the European currency is under challenge and the course of the American economy is clearly better, the current prices are relatively low and limit the desire of investors to make large bets in favor of the dollar at these levels.
And today’s agenda is extremely rich with lots of financial data from the United States, with Personal Consumption Expenditures standing out. This is one of the favorite indicators that the Federal Reserve watches very closely as it relates to the path of inflation in the U.S. economy and its decisions.
The behavior of the exchange rate in recent days was relatively expected, as after the European currency’s temporary upward movement that took it to the threshold of 1.07, it was relatively difficult to maintain the same momentum.
The pair’s return to the lower levels largely confirmed my thoughts expressed in a previous article, as I emphasized that the continuation of the European currency’s upward momentum could not find further support.
However, it seems that a digest of the 1.05-1.07 levels is necessary before the next big move in the exchange rate.
I don’t see any major reasons to change my basic thinking and my desire to buy the European currency after sharp dips and especially after new local lows, as the behavior of good reactions has been shown to be back in play.
