Vasilis Tsaprounis
Independent Analyst
The single European currency appears to have entered in a new round of uncertainty after the strong US jobs report on Friday.
The euro is already falling below the 1.07 level, retreating almost 100 basis points from highs of 1.0780 where it was on Friday before the data release.
The US labor market continues to be one of the strong components of the US economy and Friday's pleasant surprise keeps the bets high and the possibility that the rate hike cycle is not over.
Currently bets on another 25 basis point rate hike are hovering around 30%.
At the same time, the aggressive rhetoric of the European Central Bank has not decreased, but the inflation data from the Eurozone, which is coming to light and showed signs of deflation of inflationary pressures, certainly does not support the ECB's narrative.
As I have mentioned repeatedly in previous articles the path of the exchange rate continues to be extremely sensitive to the path and prospects of rate hikes by the two main central banks.
Economic data announcements and statements of officials from the two central banks continue to influence the exchange rate day by day.
After a very strong reaction of the European currency almost 150 basis points from the lows of 1.0635 now the path of the exchange rate shows again a mild positive momentum for the US currency which is capable of taking it back to the recent local lows.
Today's agenda is quite interesting with the announcement on the path of producer inflation in the Eurozone and the report on the services sector in the US standing out.
My basic thoughts on the course of the exchange rate has no any changes, as in previous articles mentioned, I will remind that the losses suffered by the European currency most likely will be limited, I see no signs of collapse and the reactions will come back to the fore every time the pair marks local lows.
So I will maintain the strategy of buying the European currency at the new dips which once again last week did not disappoint me.
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