EUR/USD could easily be trading current level in December
July 8 (Reuters) -Trapped in tight ranges for eighteen months EUR/USD could easily be trading its current level in December.
Despite speculation about bigger moves, the pair has been stuck largely within 1.05-1.10 and hasn't strayed far from the centre of that range during the French election.
It certainly did not fall toward parity as some feared would result from changes in interest rates. Instead, the pair remains stuck close to the centre of the 1.0448-1.1276 extremes traded since January 2023 regardless of a rate gap that has favoured the dollar throughout this quiet period.
The gap, which widened slightly when the ECB cut its deposit rate earlier this year, isn't expected to change much. U.S and euro zone interest rates are expected to drop by a similar degree with the rate gap eyed around 1.5 percent at the end of next year.
The gap in interest rates which hasn't much affected EUR/USD, probably won't lead to a big change in the future. This is reflected by a drop in options vols that suggests less chance of sustained movement in any direction.
Ballooning surplus masks ugly situation likely to undermine euro
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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