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Nov 18 - 11:55 AM

EUR/USD - COMMENT-Buoyant EUR/USD Resists Fed's Gravitational Pull

By Christopher Romano  —  Nov 18 - 10:00 AM

EUR/USD gave up overnight gains and traded slightly lower Friday but remained buoyed near up-trend highs as investors appeared undaunted by recent hawkish Fed rhetoric.

Boston Fed President Susan Collins said the Fed likely needs to tighten more to fight inflation and should then keep rates at a sufficiently restrictive level for some time nS0N31Z00O, echoing comments from Minneapolis Fed President Neel Kashkari nL1N32D2DA and St.
Louis Fed President James Bullard nL1N32D1J0.

However, price action in interest markets suggests the aggressive tone on policy has fallen on deaf ears, indicating rates and the dollar should weaken.

March 2023 Eurodollar price EDH3 is trading well above the Nov.
4 low and appears poised to resume its recent rally.
U.S. Treasury 2-year yields remain below the 10-day moving average, consolidating losses from the Nov.
4 high.

The U.S. Treasury 2-year/10-year spread suggests a recession and Fed pivot are likely as its inversion extended below -70 basis points to levels not seen since May 2000.

Tighter Italian-German 10-year yield spreads should underpin EUR/USD, and a rally toward 1.0800 could be possible.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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