EUR/USD: Interest rates and US debt will determine the near future of the exchange rate

The single European currency is trying to approach the level of  1,14 again, having absorbed a significant part of yesterday's losses, where it temporarily fell well below 1,13.

The European currency's decline of almost 200 basis points from Friday's high of 1.1475 partially confirmed my idea to maintain the position in favor of the American currency, but the initial positioning turned out to be wrong and hasty.

President Trump's enigmatic personality with questionable decisions to impose high tariffs on key trading partners has raised the concern index to high levels and any eventuality is possible.

The impact that the President's policies will have on America's credibility has alarmed many investors, who have recently moved away from US government debt securities, with the result that the US currency has been called into question.

Unfortunately, it is very difficult to predict the extent that such a prospect could take, as the American debt is at unimaginable levels and if there is panic in this environment, the developments will not be at all pleasant for the entire global money markets.

The '' tariffs dance '' that President Trump has set up in recent weeks, combined with central bank decisions in the coming future remains very high on investors' agenda.

The decision to reduce key interest rates by 25 basis points at tomorrow's meeting of the European Central Bank is fully expected, while a major surprise is not ruled out, as it would not be unreasonable for President Lagarde to move more aggressively in trying to prevent a possible recession in the eurozone. 

However, a 50 basis point reduction is not the main scenario and if it happens it will be a significant shock to the markets with the European currency likely to come under significant pressures.

Today's agenda is quite interesting with eurozone inflation and US retail sales figures standing out.

Regarding the course of the exchange rate, the landscape remains extremely cloudy and dangerous as the data changes from moment to moment while the risk with the American debt remains on the agenda.

I would prefer to remain on hold in such an environment and exit the dollar position relatively soon.