The euro is trading at its highest this year against the dollar, emerging as a clear winner from the recent ructions in global currency markets that have unsettled a strong dollar and halted a relentless slide in Japan’s yen.
After all, history shows $1.10 is not an easy level to crack and as recently as April, some analysts speculated the euro could weaken to parity. It’s now the second best performing major currency versus the dollar this year after sterling. This shift followed weak U.S. labor market data, which sparked recession fears and jolted stocks and bonds. Markets have since calmed, but policy easing expectations remain.
It’s at the top of recent trading ranges and there’s less scope for rate differentials to shift further in its favor, said analysts.