EUR/USD: US Dollar remains in spotlight as hot inflation has change the bets

The single European currency is currently holding above the 1,07 level, trying to defend the crucial level in the wake of yesterday's intense pressure following the announcement on the path of consumer inflation in US.

Yesterday provided strong emotions as after quite some time where the exchange rate was locked in a narrow fluctuation band the hot inflation announced in US  acted as a trigger for volatility to increase, the US dollar was back in the spotlight and the international stock prices came under intense pressures.

Now the bets for interest rates cut by Fed on June have narrowed significantly,  while at the same time chances increasing that the total rate cuts for 2024 will be two rather than three.

This development confirmed the thoughts that the American currency maintains the initiative, the interest rate differential remains clearly in favor of the US dollar and the European currency, beyond some good reactions, will have difficulty developing a strong bullish trend.

At the same time, the Μinutes from the Fed's last meeting confirmed that inflation remains a key concern for the US Federal Reserve and that further tapering is not a foregone result.

Οn today's agenda, the meeting of the European Central Bank stands out, in which no change in the level of the main interest rates is expected, but the comments of the president Christine Lagarde are expected with interest, which if they do not bring any changes on the table, the euro will not be able to reverse easily the downward trend.

Τhe recent up move in the US currency somewhat vindicated my thoughts as expressed in previous articles as although I preferred to remain in a wait position my messages were clear that the US dollar had further room for gains.

It's likely there is additional room for dollar gains and the level of 1,07 could be come under challenge, especially if President Lagarde's comments later in the day will support such an outlook.

Although the US currency remains in the foreground and yesterday's developments with hot inflation increase the possibility that the Euro will remain under pressure, I remain in my view of buying the European currency near the 1,06 levels as I believe that reaction behaviors will remain on the game.