Euro on defense mode near 1,1250 with a further rebound may in play

Vasilis Tsaprounis Independent Analyst

The single European currency is trading near 1.1250 level, attempting to move further away from its recent lows of 1.1160.

The key factors that have recently weighed on the European currency remain in play, and despite the temporary stabilization above the 1.12 level, a further decline remains a possibility.

Political uncertainty—which remains high on the agenda in major Eurozone economies such as France, Germany, and Spain—is certainly not helping the European currency stage a significant recovery; this factor, alongside the trajectory of interest rates on both sides of the Atlantic, will determine the future course of the exchange rate.

Developments in the Persian Gulf remain quite murky, with the possibility of further escalation persisting. Ηowever, both sides appear to harbor some reservations so far, as the potential big losses on all fronts seem to be unbearable for everyone involved.

Geopolitical uncertainty and concerns regarding political developments in the Eurozone, combined with the strong yields on US debt securities, have created a cocktail that has supported the US dollar so far.

Central banks currently face a dilemma regarding the containment of inflationary pressures and the high level of interest rates on debt securities . Τhese rates have reached critical levels, and any further significant rise could derail budgets and the recovery trajectory of major economies.

Today's economic agenda confirmed concerns, with German factory orders and Eurozone retail sales coming in below expectations.

In such an environment, I would prefer to remain on waiting mode, while keeping in mind a potential position in favor of the European currency near 1.10 level.

Author

Vasilis Tsaprounis

Independent Analyst

Vassilis Tsaprounis possesses over 25 years of professional experience in Capital Markets and especially in the foreign exchange market.

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