The Euro has bounced despite a clear rethink of the once-broadly-held idea that the US will see earlier, deeper rate cuts than the Eurozone
Still, foreign exchange market focus remains very much on the Dollar and the US Federal Reserve. The Euro has made gains this week, as have other currencies, likely as investors take some profit after EUR/USD falls seen since early March. Fed Chair Powell and others have struck a dovish note in recent days, leaving markets with the impression that rate cuts could begin in June, and continue into this year’s second half.
Bank of Italy Governor Fabio Panetta has already said that inflation was falling quickly back to target while ECB Chief Economist Philip Lane reportedly said on Monday that he was confident of this too. Given this outbreak of dovishness, the Euro’s strength is perhaps surprising. After all, it seemed hugely probable at the start of this year that the Fed would be cutting rates much before the ECB began its process.
A slide below that level would be worrying for Euro bulls as it would bring into focus an uptrend line previously dominant since October 3, 2023. That currently lurks some way below the market at 1.07912 but seems likely to face a test in the coming two weeks or so. Bulls will need to crack psychological resistance at the 1.09 handle before attempting to retake the high of March 21 at 1.09400. If they can manage that then the current broad range peak of 1.
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