Struggle is real for Euro even as periphery bonds rally

01.06.2018 / 12:15

Rating:

EUR/USD has held up pretty well despite this week's negative news flow, but a sell-on-rallies mentality will continue to reign in the near term.

It's impressive the pair hasn't revisited the recent 1.1510/20 lows from earlier this week. Yet the probability of a fully-blown trade war is in store, and it would be unambiguously negative for the euro-area economy and currency. Ongoing political uncertainty in Italy and Spain will also keep the euro on the back foot, even with countries' bond markets on a tear in the past few days (albeit still above the one-year average in Italian 10-year yields' case.)

The barriers to a longer-term reversal are high, as it will involve a concurrent improvement in regional politics and step back in global trade tensions. Euro bulls will have awhile to wait for that narrative to play out. For now, the best they can hope for is sideways price action.

Source: Bloomberg Pro Terminal

Trader Aleksandar Kumanov

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Struggle is real for Euro even as periphery bonds rally

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