EUR/USD inter-markets: it’s all about the dollar

EUR/USD has accelerated its weekly upside today, with the generalized selling pressure around the greenback as the exclusive catalyst behind the down move. As scepticism on a potential rate hike by the Fed seems to have returned to the markets, the upbeat sentiment around USD post-Payrolls figures died off, allowing in turn the strong rebound in the risk-associated space.

Mixed performance from US yields across the curve is trimming the chances of a rebound in the buck for the time being, while Fed Fund futures prices are extending the drop to session lows; according to CME Group’s FedWatch tool, the probability of a rate hike next month remains stuck at 15%, while the probability of higher rates in December stays at just above 35%.

In the meantime, volatility tracked by VIX remains in marginal levels, although this remains largely ignored by markets.

All in all, a continuation of the offered tone in USD could well see EUR/USD edging higher to the 1.1200 neighbourhood, ahead of the 1.1260 area, where sits a retracement from the May-June down move.