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Nov 23 - 11:55 AM

EUR/USD - Dollar Index At Week's Lows, As Fed-ECB Policy Pivots Weigh On EUR/USD

By Randolph Donney  —  Nov 23 - 09:40 AM

  • The dollar index fell 0.25% as 2-yr bund-Tsy yields spreads fell 5bp

  • Hawkish ECB comments, above-f/c but sub-50 EZ PMI lift ECB rate hike pricing

  • 2-10-yr bund yld curve inverts more Wed than more deeply inverted Tsy curve

  • Worry for USD is Fed will overshoot on hikes and have to cut sharply later

  • ECB seen further behind the inflation curve than the Fed

  • Fed priced to cut rates 40bp by year-end after a June peak

  • ECB only seen cutting rates 20bp from a July peak

  • And Tsy 2-10 yld spread at -79bp vs bunds at -20bp weakens L-T USD draw

  • BOJ static at zero so USD/JPY's reversal of 50% 2020-22 uptrend is Fed-led

  • USD rebound from post-soft US CPI drop was capped by 108, tenkan & 50% Fibo

  • Nov's 105.30 low an interim reversal target, and now has 200-DMA at 105.22

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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