A change in investor’s sentiment towards more risk taking has been helping the euro to demolish the safe-haven status of the US dollar. Today, the EUR/USD gained 71 pips in few hours but one has to look at a longer term chart to really understand the magnitude of the EUR/USD up trend. The euro rallied more than 1700 pips since January trading from a low of 1.2544 in March to as high as 1.4337 in June. Having said that, the euro starts looking very expensive, in particularly for European exporters who have to compete against American companies for a share in global trade. Looking ahead, we expect a considerable deterioration of the euro zone economy which could lead to a significant shift of interest rate differentials in favor of the U.S. dollar.
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