The 10-year BTP-Bund spread touched 200bp yesterday – the level that usually triggers a spillover into FX. The euro is starting from an already undervalued position this time, and the ECB's TPI might mitigate the FX impact, but conditionality is a material concern. The overall environment, however, remains highly challenging for the common currency. The recent moves in EUR/USD have largely followed those of the dollar, with higher treasury yields propelling the greenback higher. We discussed in this article how we expect the pair to react to further upward swings in US rates. A 5.0% 10-year yield would bring EUR/USD ... (full story)