EUR/USD: Markets and Dollar on rebound mode but risks remain

Τhe US dollar is recovering against all major currencies but mainly against the Japanese Yen which was the main cause of the significant pressures it received during yesterday.

Τhe challenge to the US dollar gave the opportunity for the European common currency to climb to the level of 1,10 which had been a challenge for a long time.

Νevertheless, as I have noted several times in previous articles, easily maintaining above these levels i think will be a difficult task for the European currency at the moment.

Indeed the US currency supported by the calm that has returned to the international stock markets and the stabilization of the exchange rate with the Japanese Yen has recovered having retreated well from the level of 1,10  the early hours of Tuesday and trades  near 1,0930 level.

Shock and awe for the international stock markets yesterday, as the latest data on the course of US economy with the reflection on new jobs but also the hot front of the Middle East with the possible escalation in the event of an attack by Iran on Israel, maintains the anxiety at high levels increasing volatility and spooking investors.

The latest macroeconomic data that have disappointed in US have affected bets on the prospect of interest rate cuts but also the yields on US government debt securities which have registered a significant decline.

The small possibility of a just one cut in key interest rates that was on the table two weeks ago is no longer there, while the possibility of two but larger size rate cuts, which could reach 100 basis points by the end of the year, increased.

This change in bets although significant may not be able to help the European currency develop a strong upward momentum and apart from some very good reaction supported and by other events to see levels well above 1,10 remains a difficult task.

I remain on hold as although the European currency moved marginally above 1,10, which was one of my targets,  I expected quite a bit higher levels for US dollars buying prospect.