Forex Flash: EUR/USD looks set to recover lost ground – Commerzbank

(Córdoba) - Greek insolvency has been averted for now, sparking relief in the FX markets, so the euro looks set to recover lost ground in the week ahead, according to the Commerzbank analyst team.

"With only a few days left to reach a breakthrough in the US debt limit stalemate, however, it is still too early to sound the all-clear, as a failure by Congress to hike the debt ceiling would result in default on the other side of the Atlantic", said the Commerzbank team. "Against this backdrop, the focus of the FX markets should shift towards the US dollar in the coming days, which will benefit the euro".

The Commerzbank team expects EUR/USD will trade higher in the week ahead. "The only risk to the euro's recovery could be particularly weak US data and a renewed sparking of recession fears – with regard to the USA in particular but also for the world as a whole. Ironically, the subsequent increase in global risk aversion and the resulting flight into safe-haven investments would then send the dollar higher", they added.