The way the EUR is flying at the moment, and with the ECB due to meet next Thursday; a rate cut may not be imminent. The single currency has found an extra pair of lungs after it broke through that option barrier ‘of strength' at 1.36. It is currently trading at or close to a 14-month high. Further easing is expected to follow if the euro-zone exports starts struggling under the weight of a strong domestic currency.
It will not be a surprise to see this market become fixated, between here and next Thursday, on whether Draghi mentions the EUR strength as a cause of concern or not. If he does not “it could add to the currency's tailwinds in an environment of intensifying currency wars.”
A number of reasons are being attributed to why the EUR currently sits on such a lofty perch. The most obvious being the sharp yen devaluation and the wider concerns about competitive devaluations have managed to spillover to the EUR strength outright and on the crosses....
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