Investors have not given up on the Euro despite a lot of volatility in the past few days with talk of Greek restructuring.
“Sentiment on the Euro has improved from last week. There is still a slight bias toward selling the euro, but currency managers have started buying it again,” said Pablo Frei, head of multi-manager programs at Quaesta Capital in Zurich, Switzerland, a large asset management company.
One important factor aiding the Single Currency buoy above the main $1.40 support level is the fact that there is a high possibility that the European Central Bank will mostly likely raise interest rates again in the near future.
In an interview with Bloomberg on Monday, ECB Executive Board member Gertrude Tumpel-Gugerell gave a good hint in possible further monetary tightening by mentioning that “interest rates should be consistent with economic activity”.
To quote her, she said, “We have to keep in mind that our monetary policy stance is still accommodative, and the interest-rate level of course has to be consistent with the level of economic activity and with the risks to price stability”.
Tumpel-Gugerell added that “These elements taken together lead then to the appropriate interest-rate level.”
She is confident that Europe’s economic recovery will continue and that the global economy is over the financial crisis.
“We see demand for loans picking up, which is very important for further economic activity, for investment activity, and therefore I think we are on a very good path,” she said. “Money markets have gone back to normal operations” and “fewer banks are now relying on central bank liquidity.”
EURUSD was trading in range, steady above the psychology $1.40 support level, currently trading the US session at 1.4168, previously hitting a low of 1.4119 and peaking at 1.4210.