EUR/USD soars but 'march upwards' could be short lived

The broad and sharp sell-off in the US dollar has propelled the EUR/USD exchange rate through the 1.17 level in the past 24 hours or so for the first time since September 2021. Without intending to sound like a broken record, the move in the pair continues to be largely driven by dollar selling, rather than necessarily an improvement in optimism towards the Euro Area.

That said, news that most NATO members have agreed to ramp up defence spending to 5% of their respective GDP in the next decade can perhaps be seen as a mild euro positive, but we don’t see this as a game changer by any means.

Market chatter will now be rife as to whether the common currency can continue its march upwards towards the FX zenith that is the 1.20 level in EUR/USD - a handle that the pair has only scaled on a couple of separate occasions in the past decade.

While this is now no longer out of the realms of possibility, it may be tough in the near-term, barring a turn for the better in Euro Area economic news. This morning’s consumer and business sentiment data could receive some attention, but investors will realistically already have one eye on Tuesday’s Euro Area inflation figures for June.