05 September, 2018
The US dollar remains strong in the middle of the week, though it does not show the yesterday's rush to peaks. Bulls seem to lose the steam, and further upturn needs fuel, which can come from the trade war escalation and US labour market figures. The market will be focused on earnings levels as usual.
Lately, the euro-to-US dollar exchange rate hit the bottom of 1.1530. At the same time, now the European currency is recovering attempting to jump at the 1.16 handle, and the closure of daily trading above this line will soften the negative impact in the near term.
The euro cast a wary eye at the events in Italy. In particular, deputy prime minister stated that the new budget that would violate EU rules with some 2% GDP to be left for 2019. Nevertheless, investors are in no hurry to get sentimental on the optimistic reports and prefer to wait for more details.
In the short-run, the euro-to-US dollar rate still faces the risk given the US dollar potential amid an escalation of the US-China trade war. However, the decline, in the long run, can be used as a chance for buying, since the euro can benefit from the end of asset buying by the European Central Bank and an upward revision of the interest rate in Europe in a year, while further monetary tightening by the US Fed may become doubtful.