The euro is still facing headwinds and German yields are still trending lower The ECB EUR index has been allowed a correctional lift to re-check into the lower end of the still sharply falling 12mt Moving Average band, which represents resistance together with a 2009-2012 descending top line and the 2010 lows near the 100-mark. In a broader perspective a more lasting correctional low has yet to be printed – likely as low as in the 90-88 area. When it comes to the 10y German yield, buyers keep responding to inter-month rallies in yield, just as was the case during Jan-Mar this year. We are not arguing that there is a correlation where one leads the other, but rather two disparate symptoms on the same disbelief in European peripherals, fuelling the rush into the core for bond investments and away from the euro into more defensive currencies. Though it should also be noted that there is an increasing stress within the European core, where not even France is safe anymore with the 10y FRA/GER spread threatening to widen further, see the Fixed Income section for more details.
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SEB tech team