EUR/USD rebounds off 1.2800

Although equity markets have been showing surprising strength, underlying fiscal worries surrounding the EU continue to weigh heavily on EUR/USD.

Over the last month we have seen the currency cross rate drop from 1.3400 down to 1.2800 in conjunction with the increasing yields of eurozone nations' sovereign debt. Once more the fear that a fresh country will require a bailout has spooked markets and seen the euro weaken.

In the last 24 hours we have had confirmation that Greece has met the requirements of the European Central Bank in order to get the latest €8.1 billion it requires to meet ongoing commitments. The timing of this has coincided with EUR/USD hitting the bottom of a range that it has been trapped inside for the last six months. The $1.28 level has now been tested a number of times and there appears to be a sizable support found in this region.

On Wednesday evening the US Federal Reserve publishes minutes from the latest Federal Open Market Committee meeting, inevitably triggering a raft of interpretations from analysts as to their significance in relation to the tapering of quantitative easing. Certainly in the short-term we will see some volatility ensue, though it is unlikely to dramatically alter the long-term picture.

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