Dollar strength continues while volatility increases

The euro rebounded to a certain extent after hitting this year’s lows while it has been sliding against its US counterpart for almost three months.

The European currency could however remain under pressure against the strong dollar as concerns about the state of the European economy could continue to weigh on expectations in addition to the softer stance of the European Central Bank.

The differential between the Euro area and US interest rates remains near this year’s high and could continue to affect the euro’s performance.

Weaker-than-expected inflation figures in Germany and Spain could also support the European Central Bank’s policy direction.

While the US dollar index retreated slightly earlier today after hitting this year’s peak, it remains at elevated levels and could continue to find strength.

The Federal Reserve is expected to maintain its interest rates at current levels for longer which could continue to support the currency’s ascent.

Concerns about the possibility of an intervention from the Bank of Japan to support the yen could continue to create uncertainty for traders.

As a result, the yen could potentially stabilize to a certain extent even though interest rates differentials and the Bank of Japan’s loose monetary policy could continue to weigh on the currency over the medium term.

This content is not investment advice. Trading involves high risks.