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Thomson Reuters
Jun 06 - 12:12 PM
EUR/USD - COMMENT-More Stimulus To Fuel The Gravy Train, Weigh EUR/USD
First appeared on eFXplus on Jun 06 - 10:05 AM

Without much FX movement, the easy money made in currency markets is via interest rates, and today's monetary policy decisions in Europe nL8N23D17V and India nBAY6HEF36 will support risk appetite, fuelling demand for carry trades.
Of all low-risk carry trades on offer, some can match the returns made by EUR/USD shorts, but none can match the available liquidity, and that's why EUR/USD shorts will remain popular.
EUR/USD has whipped around today, but within an hour of the European Central Bank decision had returned to the middle of the day's range.
With opposing forces at work in U.S. and euro zone rate movement, the inability of EUR/USD to break its bounds is no surprise.
Without a breakout, vols will fall, and if they do then more cash will head towards carry trades, even though the environment that's dominated by negative factors like recession risk doesn't suit them.
The carry bubble may burst, but it may get much bigger first.

EURUSD and vol Click here

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