While the euro's performance has been disappointing to its backers in recent weeks, analysts say there has not been a major shift in sentiment in favor of the US dollar.
Rapidly improving US economic data have contrasted with less-thanrobust numbers from the eurozone, prompting the unwinding of speculative positions that had helped to boost the euro, says Ashraf Laidi, chief currency analyst at MG Financial Group in New York.
He says the euro could soon bounce back, since the single currency has demonstrated a seasonal tendency to rise in December in every year since 1999.
What's more, as the European Central Bank's monetary policy shifts away from an easing stance into a more neutral positioning, money markets will price in an earlier rate increase in the eurozone than in the US, which should be supportive of the euro versus the dollar, Laidi says.
Strength should also reemerge in the British pound after market participants expect further Bank of England tightening and the central bank maintains its silent approval of the appreciating currency, he says.
From the looks of things, both the British and Australian interest rate hikes announced in early November could be the start of a series of increases in those countries, according to Carl B. …