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17 Sep 2013
Flash: EUR/USD; Still Divorced from Yield Spreads - TD Securities
FXstreet.com (London) - The EUR has popped higher along with all other currencies against the USD on the back of weekend news that Summers is out of the running for Fed Chairman, explained research teams at TD Securities.
Key Quotes:
"Treasury yields are also sharply lower on the news which has pushed German-US spreads in favour of the EUR. As we have pointed out over the past week however, German-US spreads are still notably divorced from their relationship with the EUR/USD spot rate over the past year".
"The current spread is still more consistent with a spot rate near 1.30. It’s also worth noting that peripheral EZ yields have moved wider v. core yields in overnight trading, suggesting the persistence of a bit more risk aversion than indicated elsewhere in the markets".
"All that suggests to us that the initial reaction to the Larry Summers news may be a bit overdone, and overall we still favour selling into the overnight rally".
Key Quotes:
"Treasury yields are also sharply lower on the news which has pushed German-US spreads in favour of the EUR. As we have pointed out over the past week however, German-US spreads are still notably divorced from their relationship with the EUR/USD spot rate over the past year".
"The current spread is still more consistent with a spot rate near 1.30. It’s also worth noting that peripheral EZ yields have moved wider v. core yields in overnight trading, suggesting the persistence of a bit more risk aversion than indicated elsewhere in the markets".
"All that suggests to us that the initial reaction to the Larry Summers news may be a bit overdone, and overall we still favour selling into the overnight rally".