EUR/USD: Euro remains in the spotlight with 1.1000 level being the next challenge

The single European currency is trying to consolidate the 1.0950 level in the early hours of Tuesday in an environment where geopolitical developments and central banks policies will determine the course of the exchange rate.

Despite all the significant thorns, there is a cautious optimism that the tragedy on the Ukrainian front will come to an end as a temporary ceasefire agreement between President Donald Trump and Vladimir Putin is close.

Many investors have bet on such a development as geopolitical stability certainly does not favor the American currency, which has traditionally functioned as a safe haven currency.

Despite the mild upward momentum of the European currency over the last 3 days, the exchange rate remains ''heavy'' and further strong rise would be a surprise in my opinion.

President Trump's ''tariff dance'' remains high on investors' agenda, with the outlook remaining quite cloudy regarding their ultimate impact on inflation and economic growth.

On the other side of the Atlantic, the latest developments with the gigantic financial packages for infrastructure and defense have certainly been the main catalyst for the rise of the European currency, but the question remains for how long they will be able to fuel such a scenario.

My assessment remains that as the dust from the latest developments slowly settles, some key catalysts will come back to the fore, such as the interest rate differential between the euro and the dollar, which will act as a drag on the European currency in its attempt to move at much higher prices.

Today's agenda is relatively poor and the only thing that stands out is various data on the housing sector in the United States.

I remain concerned about the possible further rise of the European currency and would prefer to remain in favor of the US dollar at these levels.