The greenback continues to gain, yet reasons are still vague. Is it shorts unwinding, reaction to renewed bond sell-off's, risk aversion or catchup to wide yields spreads? There is no shortage of optimism around the US economic health (accelerated by massive fiscal spending) but balanced out by bearish commentary over equities and twin deficits. US 10yrs yields are now edging back up after US Presidents day but still below Valentine’s day high. Failure of EURUSD to break new highs at 1.2555 put the pair in corrective mode. Should German ZEW and EU PMI coming in weaker than expected plus ECB sounding less hawkish we should get continuation of pair bearish trend.
By Peter Rosenstreich