EUR has also been surprisingly soft in light of the convincing win by French President Macron’s new En Marche political movement securing a majority in parliamentary elections; resulting in significant further narrowing in French-German bond spreads, and falling corporate credit spreads in Europe, explains the analysis team at Amplifying Global FX Capital.
“It is not clear that we can blame the underperformance of EUR and JPY in the last week on monetary policy, but the ECB, like the BoJ, recommitted to its current QE program and downplayed prospects for more rapid normalization.”
“The ECB lowered its inflation forecasts for 2018/2019, whereas the Fed maintained its inflation forecast for the next two years. This is despite stable to slightly higher core inflation in the Eurozone in recent months and a sharp fall in US core inflation. EUR, like the JPY, may have become somewhat overbought in recent months, and vulnerable to a period of correction.”
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