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Real rate spread flashing red for EUR/USD – BNPP


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FXStreet (Barcelona) – The BNP Paribas Team warns of a possible downside risk ahead for the EUR/USD.

Key Quotes


“European bond markets still remain in the spotlight with the 10y bund yield rising to a new high on Wednesday and contributing to the ongoing firm tone in EURUSD.”


“We note however that real rate differentials have turned sharply against EURUSD, mainly driven by raising US nominal yields and eurozone inflation expectations . This suggests that once bond market conditions normalize (our European rates strategists see bund yields now much closer to fair value) EURUSD would be vulnerable to significant downside.”