Euro: Extends rebound as yields stabilize against US Dollar - Danske Bank
Danske Research Team notes that EUR/USD has extended its rebound towards 1.1600 as European yields remain elevated while US Treasury yields stabilize after the recent spike.
Euro extends rebound as yields stabilize against US Dollar, according to the Danske Research Team. The EUR/USD exchange rate has risen towards 1.1600 as European yields remain high while US Treasury yields stabilize after a recent spike. Analysts believe markets may be pricing in too many European Central Bank rate hikes, suggesting potential for European rates to fall.
Upcoming FOMC Minutes are expected to be the key factor in determining further direction for the US Dollar. Yesterday, European assets faced a challenging situation with equities falling, European yields rising as the yield curve flattened, and commodities increasing in value. Despite the negative sentiment in Asia, US yields have steadied overnight, with the 10-year US Treasury yield decreasing from an intraday high of 4.75% to 4.69%.
The ZEW economic sentiment index in Germany surprised on the upside in August, with expectations rising to 34.2 (consensus: 30.0, previous: 26.3), and the assessment of the current situation improving to -61.1 (consensus: -69.3, previous: -77.6). Growth in the euro area is supported by fiscal stimulus, and final July HICP inflation in the euro area is expected to confirm the flash estimate of 2.9% year-over-year for headline inflation and 2.5% year-over-year for core inflation.
In the US, the minutes from the Federal Open Market Committee's July meeting are released later in the day, with markets seeking a more detailed sense of the committee's thinking beyond Kevin Warsh's limited forward guidance.
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