Today’s economic data from Germany show the market’s sentiment remains low as the economic downturn hurts the global economy. Nevertheless, there signs that some Euro + sentiment is emerging despite the recent Dollar strength.
From a comparative point, some Dolar weakness is imminent due to recovering commodity prices and Fed’s monetary standing. On the Euro end, economic and financial data show that some Euro strength is underway. After the announcement that China is returning back to normal life may improve Europe’s exports that may bring some action to the manufacturing sector in the weeks to come. Today’s March data is evidence that the manufacturing sector may recover soon.
The 2-5 years curve spread between Euro and USD refrains from rising as happened in the past few weeks, implying some Euro strength is about to come soon. In addition, the 2-10 years spread of the USD is in flattening mode, suggesting that long term interest rates fall fast in the US and that the US economy may enter and remain in recession for some time.
In the face Fed’s unlimited money supply politics, funds may limit their commodity sales to generate Dollars. So one may expect some commodity strength in the days to come, giving a boost to the Euro FX.
So, expect EURUSD to reach as high as 1,09 level in the coming days.