Euro strengthens amid dollar weakness

In the global foreign exchange market FOREX, the euro has shown noticeable recovery against the US dollar in recent days. Compared to the end of July, when the euro briefly dipped to 1.1353 dollars, it has risen by 135 pips and at the time of writing is trading around 1.1588 dollars.

Only the day before yesterday the euro tested the 1.1600 area and even rose to 1.1614 dollars, but failed to hold the gains. In general, an interesting situation is currently forming in FOREX: on the one hand, fundamental factors are playing for a weaker dollar, and hence in favor of the euro; on the other, the 1.1600 dollar zone remains an important technical barrier. According to analysts, whether the EUR/USD pair can consolidate above this level largely determines the further direction of movement.

It is important to understand that the current strengthening of the euro is largely driven not so much by a sharp improvement in the economic situation in the Eurozone, but by the weakening of the US dollar. The main factor of recent sessions is the change in expectations regarding the future policy of the US Federal Reserve. On July 29, the Fed left the benchmark interest rate unchanged at 3.75%, while three FOMC members voted for a 25 basis point rate hike, which speaks to the fairly hawkish stance of part of the American central bank.

However, subsequent economic statistics raised doubts about the need for further monetary tightening. Weaker employment figures, more moderate inflation data and other signs of a cooling American economy emerged. As a result, yields on US government bonds declined and demand for the dollar weakened. All this creates a favorable environment for EUR/USD growth.