Vasilis Tsaprounis
Independent Analyst
The single European currency is falling well below the 1,12 level in an environment of optimism as negotiations between the United States and China regarding reaching an agreement have brought the American currency back into the spotlight.
The dust from the trade war that President Trump started has settled considerably, restoring a climate of confidence in the markets, with international stock market prices having absorbed a significant part of the large losses at the beginning of last month.
Forecasts for the potential impact of the trade war on the United States economy have begun to improve significantly and the significant challenge that the American currency had faced has been reduced.
At the same time, yields on US government debt securities remain high, which, together with the reducing concerns about a possible debt default, strengthens the US currency.
Since some significant calm has returned to the international money markets, the interest rate differential between the European currency and the US dollar has begun to return to the agenda, with the gap continuing to favor the dollar.
Today's agenda is relatively poor, but developments from the agreement between the United States and China are likely to monopolize investor interest.
The good environment prevailing in the markets at the beginning of the week is also due to developments regarding a possible meeting in Istanbul, Turkey, between Ukraine and Russia in the coming days.
The currency pair has approached the 1,11 level, confirming my thoughts about the bottom of a larger trading range in the near term between 1,11 and 1,16 levels.
However, I would prefer to remain on hold as there is likely room for further decline in the European currency while President Trump's controversial personality could strike again at any time.
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