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Rate Differentials Getting Traction
This Great Graphic is the bane of our euro bearishness, at least until last week's FOMC meeting. This Bloomberg chart shows the US premium over Germany on 2-year money (white line) and the inverted euro (yellow line). We have often found the spread helpful thinking about the euro's movement. You can see how well the differential tracked the euro-dollar exchange rate until more recently and especially since February. However, the divergence of monetary policy is reaching a point now that indeed seems to be re-coupling the two time series. Although most Fed watchers still expected the first hike in H2 15, there is ... (full story)
