Τhe single European currency remains in a narrow trading range for a sixth consecutive day as the 1,09-1,10 levels have monopolized interest and investors struggle to find the key catalyst that will give to the pair some concrete direction.
Last week’s US inflation data was mixed and has so far failed to shed any light on the Fed’s intentions regarding the time horizon for the first rate cut.
My assessment remains that further macroeconomic data will be needed to confirm the continued and steady decline in inflationary pressures for the Fed to make any decision.
Βets on the possibility that the Fed will cut key rates in March, although they remain high on the agenda, I think they have little chance for now.
In scenario in which these bets will not confirmed will have the consequence of disappointing investors who are positioned in favor of the European currency and pave the way for further gains in the US currency.
Of course it is still very early as there are about 2 months left for any decision and a lot of new data will have come to the table before that.
At the same time let’s not forget the geopolitical landscape as on the Middle East front things remain extremely volatile and any further escalation could strengthen the US dollar as it traditionally functions as a safe haven currency.
Τoday’s agenda due to the holiday the US remains extremely poor and the only thing that stands out is industrial production in the eurozone.
If no any major surprises the pair will struggle to break out of the tight range of the last few days as investors remain cautious and avoid big bets for now.
The wait-and-see attitude remains as my main thought.
