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Dec 06 - 11:55 AM

EUR/USD - COMMENT-EUR/USD Resilience A Warning For Shorts

By Christopher Romano  —  Dec 06 - 10:10 AM

EUR/USD traded near flat on Tuesday as the dollar weakened broadly, and the inability to sustain the previous session's downward momentum should be a concern for shorts.

Investors may be looking past the U.S. data that pushed EUR/USD lower on Monday, focusing instead on the yield curve and potential for a less hawkish Fed in 2023.
The 3-month/10-year spread is at its most inverted in 41 years, and 2s-10s is near its most inverted since October 1981.

With inversions traditionally considered a warning of recession, investors may become increasingly focused on the likelihood that a downturn would alter the Fed's bias toward cutting.

JP Morgan CEO Jamie Dimon said a mild to more pronounced recession was likely ahead, and BofA's CEO said research predicted three quarters of mildly negative growth next year.

Italian-German 10-year spreads are tightening -- indicating uncertainty over Italian government finances could be abating.
Spreads are poised to break Nov.
24 tights, potentially underpinning the euro.

data risk looms with November PPI and CPI due before the Fed's Dec.
13-14 meeting.
Downside surprises would probably send U.S. rates and the dollar lower.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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