Just how high can the EUR climb in the current political climate? Mind you the Single Currency is trading at highs against the USD not seen in a while. But with the situation in Russia and Ukraine ready to grow more intense how long will investors be willing to buy the EUR at these highs. A real combination of uncertainty is hovering over the broad markets and for the moment traders are acting with a sense of equilibrium, but for how long?
The Fed’s FOMC meeting will climax tomorrow with its monetary policy statement, but no real surprises are expected and the status quo is expected from Janet Yellen. The American’s have been threatening to carry out a tapering, but it has become apparent that investors are not exactly worried about a massive move from the Fed. Up to now, the Fed has been rather passive and is trying its best to maintain an air of stability.
Vladimir Putin seems content to test Europe’s stamina and determination on the future of the Ukraine and with sanctions being threatened it is clear that some type of measures would than be carried out by Russia regarding gas supplies. The political game is increasing risk around the table and when measured it points to a EUR that should find some nervous trading surrounding the EUR/USD and other pairs in the FX market. The end game remains unclear, but long-term and recent moves by Russia has shown a tendency that Russia in fact gets what it wants and this might be the case with Crimea too.
The German ZEW Economic Sentiment reading will be released very soon. Europe’s economic data has been lacklustre for a long time even as growth is continually promised. However Germany is the one bright spot for Europe on a constant basis. A poor report would certainly add to pressure on the EUR, but the question is if that will occur. Equities in Europe bounced back yesterday as did Wall Street, but caution is certainly a prevailing sentiment still on Wall Street, in Asia, and European bourses.
The EUR continues to trade at highs even with the risk of the Ukrainian crisis growing. And from across the Atlantic there is a worry that the Federal Reserve will act and cause a stir tomorrow. The Single Currency is likely to see a volatile burst of trading the remainder of this week. And Digital Markets Advisor believes the EUR is valued too high in the short-term.