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10 Jun 2014
EUR on the defensive - TD Securities
FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities broke down the recent activity around the EUR.
Key Quotes:
"European centers that were closed for Whit Monday holidays have returned to add incremental supply into the markets, pressuring the EUR lower. European banks had noted corporate buying interest earlier in the overnight session as a factor that might drive the EUR higher towards the mid 1.36 area on the day."
"Instead, the EUR finds itself very much on the defensive as the weakest-performing major currency on the day so far. Spreads may be starting to be more of a factor for EURUSD."
"The EUR has been rather immune to short-term spreads movement against it in the past few months but, in the wake of last Thursday’s ECB easing, the widening in 2-year Eurozone-US spreads has been quite decisive. Investors can pick up an additional 36bps in yield in US 2-year instruments relative to Eurozone (or German) bonds of the same tenor these days—that is the biggest yield advantage for the USD over the EUR since 2007."
"All else being equal, we think wider spreads call for a test of 1.35 near-term at least. Recent history shows that 2-year spreads in the –25/30bps range for the EUR have been usually associated with EURUSD trading nearer 1.30."
Key Quotes:
"European centers that were closed for Whit Monday holidays have returned to add incremental supply into the markets, pressuring the EUR lower. European banks had noted corporate buying interest earlier in the overnight session as a factor that might drive the EUR higher towards the mid 1.36 area on the day."
"Instead, the EUR finds itself very much on the defensive as the weakest-performing major currency on the day so far. Spreads may be starting to be more of a factor for EURUSD."
"The EUR has been rather immune to short-term spreads movement against it in the past few months but, in the wake of last Thursday’s ECB easing, the widening in 2-year Eurozone-US spreads has been quite decisive. Investors can pick up an additional 36bps in yield in US 2-year instruments relative to Eurozone (or German) bonds of the same tenor these days—that is the biggest yield advantage for the USD over the EUR since 2007."
"All else being equal, we think wider spreads call for a test of 1.35 near-term at least. Recent history shows that 2-year spreads in the –25/30bps range for the EUR have been usually associated with EURUSD trading nearer 1.30."