Falling German bond yields add to headwinds for the euro
10-year German bond yields fall to their lowest levels since November 2016
The European Commission's latest growth forecast cuts yesterday is sparking a sharper reaction in the rates market than it is in the currencies space and it's about time euro traders start to take notice.
The real worry here is that yields start slipping back to 0% territory to match what we're seeing in Japanese bonds. That's when you know that the situation in the Eurozone economy is in dire straits.
Even if yields weren't much of a supportive factor to the euro in the past, a fall back to negative will just prove to be downright unattractive for investors. And even if this doesn't precipitate a significant fall in the euro, it does present a case that the dollar should remain more attractive considering that Treasury yields aren't suffering such a drop in comparison to what we're seeing here.