Societe Generale FX Strategy Research notes that as EUR/USD is breaking above 1.10 again, there are two important caveats to mention.
“Firstly, that the currency is still moving faster than the yield moves and needs higher Bund yields to provide some confirmation. Secondly, the move isn’t as impressive if I look at real yields, as US 10-year breakevens are at 1.85% now, also their lowest since November,” SocGen notes.,
As a result, SocGen argues that the EUR/USD advance is likely to continue to be ‘a case of two steps up and one step down’.
EUR/USD is trading circa 1.1080 as of writing.
Source: Societe Generale Cross Asset Research
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