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Thomson Reuters
Apr 18 - 03:48 AM
EUR/USD - COMMENT-Divergence In Inflation Trends Dooms EUR/USD To Fall
First appeared on eFXplus on Apr 18 - 02:20 AM

European and U.S. inflation expectations have diverged a lot this year, and with their interest rate gap already wide, EUR/USD is likely to fall further.
The five-year, five-year inflation swap for the euro zone, a popular measure of inflation expectations, has plummeted; the swap for the United States has rallied.
There looks to be strong correlation between expectations and EUR/USD, and since the rate gap has rarely been greater, that correlation may have a bigger impact.
The divergence in expectations is one of the biggest and quickest moves seen in the last five years, but in the first quarter of 2019 EUR/USD has seen one of its quietest periods ever.
Either traders are ignoring the move altogether or are unaware of it.
The latter seems more likely, and when traders wake up they're likely to lean harder on EUR/USD.

EURUSD, EUR 1y swap, US and EZ 5yr-5yr inflation swap and spread Click here

Source:
Thomson Reuters IFR Markets

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