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May 28 - 07:24 AM

EUR/USD - COMMENT-EUR/USD Traders Are Trying To Eat Their Cake

By Jeremy Boulton  —  May 27 - 07:15 AM

EUR/USD traders reacted to massive U.S. stimulus and bought.
Traders have reacted to massive European stimulus plans by buying.
One of these reactions is wrong.
If stimulus is good, which markets obviously assume given some big stock and commodity gains, then U.S. stimulus, which is the largest of all, is good for the dollar, not bad.
If stimulus undermines a currency, then recent euro gains after a European Union recovery fund was proposed are flawed, which means that a lot of buying has is occurring at the high end of current ranges nL1N2D90H5.
Stimulus usually undermines currencies with low rates.
Eurozone rates are lower than U.S. rates.
The difference is slight, so the long-term EUR/USD outlook may now be determined by which economy is stronger.
The United States was stronger going into this crisis.
Both economies have been deeply hurt but the U.S. economy is larger and with greater stimulus should see a faster recovery.


EUR/USD Click here

Source:
Refinitiv IFR Research/Market Commentary

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