The latest EUR/USD rally was based on two factors:
- Spiraling commodity prices prompting increased reserve diversification from emerging market central banks
- Rapidly rising European bond yileds juxtaposed against falling US yields
Don’t look now but both those factors have since reversed. These may be temporary, but they have required a major repricing of EUR/USD.
German 2-year shantz have fallen 17 basis points in yield from today’s highs, now at 1.78% from 1.95%.
Oil is on a $105 handle from $114 earlier in the week and silver is on a $37 handle from testing $50 little more than a week ago…The landscape has clearly changed, like it or not.
