EUR/USD Inter-Market: Rallies in Tandem with VIX, Rest Intrinsics also Justify the Latest Upmove
A renewed bout of buying interest seen around the EUR/USD pair post-European open, looks to have gathered pace, with the major now heading for a test of previous high reached at 1.1173.
The latest upmove can be justified by the persistent risk-off conditions during the European trading hours, as rightly depicted by the sharply higher VIX and tumbling German 10-year bund yields, as market look to protect their capital and seek safe-haven/ low-yielding currencies such as the EUR.
Further, a drop in the Fed funds rate futures drag the US 10-year treasury yields lower, which in turn weighs on the greenback across the board, and hence, collaborates to the upbeat momentum seen behind EUR/USD.
Looking back towards the last NY session, the main currency pair spiked to 1.1173 levels, mainly driven by a strong rebound staged by the Fed funds rate futures following the release of mixed macro data from the US. The subsequent slide in the major was justified by falling German yields, while a steady increase in the VIX indicated that the markets had started to re-balance and could result in a break to the upside, as witnessed towards the late-Asian trades.
To conclude, the movement seen in the VIX acts as the leading indicator lately, to predict the future course of EUR/USD. Hence, the focus should remain primarily on the VIX price-action as we head into the ECB policy decision due tomorrow.