The single European currency remains below the level of 1.08, as yesterday’s announcement on the course of consumer inflation in the United States did not surprise and was unable to influence the exchange rate.
The single European currency managed to temporarily rise above the 1.08 level in the wake of the announcements, but was unable to maintain the gains and soon retreated.
This movement in the European currency reminded us of the Euro‘s ability to react and limit losses when it is under pressure, but at the same time it does not seem capable of regaining a strong upward momentum at the moment, especially if it does not receive some significant support from the two very important Fed and ECB meetings today and tomorrow.
The bets on the table at the moment clearly favor the possibility that the Fed will cut rates much later than its counterpart in the ECB.
Of course, the recent dramatic fall in energy prices, with the significant drop in oil and natural gas prices, if they remain at low levels, is expected to have a significant impact on inflation prices, which can cause surprises and significantly change the bets regarding the central banks’ decisions.
As the European economy has proven to be more vulnerable In energy prices, the maintenance of low prices I believe will have a greater impact on the old continent and the path of de-escalation of inflationary pressures will be maintained at a good pace, consistent relatively soon the European Central Bank may feel that it could proceed with the first rate cut after winning the inflation battle.
This could significantly increase the chances of more than 50%, which is currently on the table, for the first rate cut by the ECB in March.
The rest of the day is expected with interest without any particular changes before the Fed meeting late in the evening.
I will keep on the table yesterday’s idea to buy the European currency after an intense fall, probably much below 1.07 level with the aim of a good correction, which turned out to be correct yesterday, but the correction happened much earlier than the desired levels.
