The Dollar continues to recover some of the ground it lost to the Euro after the Fed announced a new, more flexible, stance towards inflation. Although the greenback’s medium to long term forecast remains skewed to the downside, investors are repositioning themselves in relation to the single currency. This follows comments from the ECB’s chief economist warning of the potentially detrimental effect that a strong Euro may have over the zone’s economies. As a result, investors were left with the impression that the European central bank will, if necessary, move to prevent its currency from going through the long term $1.21 resistance.
