• 3 hours 3 Oil Stocks Ready To Weather The Geopolitical Storm
  • 21 hours Gold Miners Eye Big Third Quarter Profits
  • 1 day The U.S. Doubles Down On Domestic Lithium Production
  • 2 days Reddit Trader Scores 14,000% Returns On Rogue Trade
  • 3 days The Tangled Web Stretching From Turkey To DC
  • 3 days The U.S. Dollar Eyes Greater Upside
  • 3 days More And More Americans Believe A Recession Is Looming
  • 3 days Is The Pot Stock Boom Over Already?
  • 4 days How The California Utility Crisis Could Have Been Avoided
  • 4 days The Ugly Truth About Investing In Private Equity Deals
  • 5 days The World Is Facing A $1 Trillion Food Waste Crisis
  • 5 days Is It Time To Buy The Dip In Gold?
  • 5 days The History Of Oil Markets
  • 6 days Three Stocks To Watch Ahead Of Earnings Season
  • 6 days Markets Flat As Bulls And Bears Battle It Out
  • 6 days The Mining Industry Still Has a Human Rights Problem
  • 7 days 5 Billionaires Booted From Their Own Companies
  • 7 days Can Toyota's Hydrogen Car Take On Tesla?
  • 8 days Why Universal Basic Income Won't Work
  • 9 days Is This The Real Golden State?
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Ashraf Laidi

Ashraf Laidi

AshrafLaidi.com

Ashraf Laidi is the author of "Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets" - Wiley Trading.

Contact Author

  1. Home
  2. Markets
  3. Other

Euro Bourses and Euro Currency's Inverse Relation Still In Play

The euro-Dax-bunds relationship continues in full swing, led by a rallying Dax (and rest of Eurozone bourses) resulting from the most notable steps taken by Greece towards reaching a deal with creditors in four months.

EURUSD and DAX Daily Charts
Larger Image

The euro's initial rally to $1.1410 following yesterday's comments from EU's JC Juncker indicating Athens' proposal was an important step forward, but later gave up gains as other EU officials as well as IMF's Lagarde indicated that much progress remained and no agreement could be finalised ironed out by Wednesday's summit. Bourses continued to rally but the euro ignored strong June flash Eurozone PMIs and weaker than expected US May durable goods orders due two possible reasons:

  1. Further diminishing of Greece Risk supports European stocks, while returns the euro to its previous role as a funding currency for higher yielding bets (equities, corporate bonds and currencies).

  2. Continued ECB purchases of Eurozone bonds keep euro under pressure to the benefit of already bolstered German equities/economy as fund managers return to hedging euro exposure by selling euro forward contracts.

10-year bund yields are modestly lower, but this is unlikely to last if Eurozone indicators remains on the rise and if optimism in Eurozone stocks and macro data translates into a more rapid normalisation of Eurozone inflation especially as the ECB keeps EUR60 bn monthly purchases on autopilot.

Yet, the more pressing relation remains between stocks and the euro. As the DAX-30 and Eurostoxx break out of their April trendline resistance, coinciding with a double breakout above their 55 and 100 day moving averages, then the potential for further gains could weigh on the single currency towards key support of 1.1080s. One exception to this assessment would be renewed gains in bund yields relative to their US counterpart.

 

Back to homepage

Leave a comment

Leave a comment