The US dollar remains on the defensive in the unwind from the Fed trade.
It's tough to pin down what's behind the euro rally. Earlier in the week, you could pin it on hopes for a ceasefire in Ukraine and stability in sanctions but with Russia cooling those hopes for today (leading to the rally in oil and gold) that's a tough sell today.
I will be watching this euro closely through the London fix (at noon ET right now because of the time change) to get a sense of how much of this is flow driven.
In the technical picture, it's all consolidation so long as we stay below 1.1121 and that might be a good level to sell against on a low-risk trade if the momentum stops after the fix.
The only thing I can see on the fundamental side is compression between the US and Europe. ECB policymakers are staying dovish (though Knot today showed some flexibility). I find it tough to believe the US will continue to tighten above neutral while the ECB is able to stay close to zero with its inflation-only mandate. That's particularly true with the energy pressure on Europe and more of an appetite for green investment/carbon taxes.
At the same time, all that might be balanced by a deteriorating growth outlook.
