EUR: Long and short of the 2017 gains – Wells Fargo

The euro remains the strongest performing G10 currency this year, with a gain of 12% against the U.S. dollar thus far in 2017, points out the research team at Wells Fargo.

Key Quotes

“This comes even as European short-term yields have fallen relative to their U.S. counterparts this year, which arguably might have led to euro weakness, not euro strength. However, a closer examination of currency/interest rate relationships suggests the euro may have become more closely tied to changes in long-term interest rate differentials, which have generally moved in favor of the euro since the start of the year. This apparent shift in drivers of the euro coincides with increasing focus on the European Central Bank’s (ECB) asset purchases, which tend to have a more noticeable influence on long-term interest rates. Should long-term rates remain an influential driver of the euro, we think the effect of Fed rate hikes on the single European currency could be diminished, while the euro should continue to gain as we approach the eventual end to the ECB’s asset purchases.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.