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Higher bund yields don’t mean higher euro
Risk assets remain supported as we approach the 'phase one' agreement, with the US taking further steps to de-escalate the trade situation by removing China from its currency manipulator list. Although positive for pro-cyclical and emerging market currencies, the accompanying decline in bond markets (a function of higher supply and improving global growth outlook) is limiting the spillover in higher yielding FX as local bonds are under pressure. However, given the weak prospect for monetary policy tightening from major central banks, the scope for a tantrum-like bond sell-off is limited, in our view. As for US data ... (full story)