Another reason to be bearish euro is added to the list. Yesterday, we wrote about risk reversals pointing to EUR/USD downside on a regression to the historical relationship between spot and options
Now we're noting 2y swap spreads extending lower in the favour of the dollar, the differential at -112bps leaves the EUR/USD vulnerable to a correction
Also, the lower panel shows an extension of the decline in the 2y Bund yield, which breached the 2.0% on Tuesday session, this is the lowest since 2022. The development comes as EU flash CPI data showed inflation falling to 1.8% Y/y in September, this led to markets building bets on ECB rate cuts
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