Now, when the Fed and the ECB have given an open signal to the market to ease monetary policy, the question arises, who has the largest arsenal of ammunition? There is no need to look for an answer for a long time, since the European Central Bank clearly looks weaker: interest on deposits is already negative, and the effectiveness of QE is debatable. In this case, Jerome Powell and his team can safely reduce the rate several times. The derivatives market signals a 94% and 66% probability of easing policy this year by 25 bp and 50 bp A good background for EUR/USD, so why not grow?

In order to update the June peak, euro fans needed fresh drivers, and they got them. Business activity in the eurozone services sector rose to a 7-month high, pulling the composite purchasing managers index. Yes, trade wars make their mark, the manufacturing sector remains weak, but ahead of Donald Trump and Xi Jinping, who can change everything. The chain of events: the end of the US-China conflict - the recovery of the Chinese economy - the growth of German exports - the strengthening of the euro is working. That's just for its implementation takes time.

It is worth noting that the growth of the euro entirely now depends on the demand for the dollar. Therefore, it is unlikely that the EUR/USD pair would be able to shoot at the data on business activity in the euro bloc. Of course, the main role here was played by the large-scale closure of long speculative positions on the US currency.

However, the fundamental factors are now emerging in favor of a gradual upward trend in EUR/USD. The Fed is ready to lower rates, the market is waiting for the end of the trade war and the improvement of macroeconomic statistics for the eurozone. Here again, not everything goes smoothly. There is an opinion that the Fed is deceiving or, more correctly, to say, keep back. In reality, there are not enough reasons to reduce the rate. If Washington agrees with China, then they will not remain at all.

Recall, Fed Vice Chairman Richard Clarida noted that the regulator will start to operate only when necessary. FOMC spokesperson Lael Brainard said that economic growth in the country is quite strong, just in early May there was uncertainty of a political nature, which may well disappear. Then the word "patience" will reappear in the lexicon of the Fed leadership. The US, like many other countries of the world, is facing a slowdown in inflation, but the reason for this lies in an extremely soft monetary policy.

The head of the Federal Reserve Bank of St. Louis, James Bullard is confident that the rate cut will accelerate inflation. Theoretically it should be so, but in real life we see a different picture. Rumors of monetary expansion contribute to a fall in inflation expectations and a slowdown in PCE.

"Bullish" forecasts for EUR/USD come true, quotes of the pair ended at multi-month highs last week. The main pair also began the new week with growth. At the same time, the euro's growth to the levels of $1.14 and $1.144 will enhance the risks of a pullback against the background of the de-escalation of the trade conflict between the United States and China and the associated increase in yield of treasuries.

Consideration should also be given to increased tensions between the United States and Iran. The euro will not like it, however, like the US dollar, if we consider it together with the safe-haven yen. However, the greenback is unlikely to fall below 105, since a significant refusal of investors from dollar assets is unlikely.