The Euro simply has little to offer against the strength of the USD at the moment. In addition to the growth gap, there is now also a gap in the statements being made by officials. While the Fed seems to remain extremely cautious and wants to wait for more positive data, ECB officials are increasingly moving in the direction of rate cuts in the near future.

The question is when will the Dollar run out of steam? It probably won't be too long before a bottom is formed.

One thing is also clear: the monthly rates of change in inflation have been at levels consistent with the 2% target for several months now. So it should not take too many more months of good data before the Fed starts to cut rates, no matter how cautious officials sound at the moment. This does not mean that we will see significantly higher EUR/USD levels in the near future. As long as the data from the real economy continues to be so positive and the Fed continues to sound hawkish, the Dollar will remain supported. However, barring a completely unexpected surprise, the downside is slowly but surely limited.