Limit to further Euro falls?
The EURUSD pair is now falling towards it's daily lows and looks like breaking the 1.1300 daily support level on a daily close. Bloomberg piece saying that although these factors have been weighing on the Euro :
- US fund rates are heading higher
- Italy budget drama weighs on the Euro
- Uncertainty about Brexit negotiations
The article cites yield differentials as re-emerging as an important driver for the exchange rate. The 30 day correlation between EUR/USD and the 10 year US German real yield differential has ben around 0.4 over the last two months. So, the piece argues that if that relationship holds for EUR/USD to keep falling either the US real yields need to rise further of the ECB needs to postpone an expected Arte hike further into 2020. Therefore, if US growth has peaked and the ECB looks unlikely to rescind it's projection then EUR/USD may be limited from here.
