The EURUSD continues to see its correlation to risk hold firm as equity markets are currently explaining 47% of price action. The pair continues to see little relationship with interest rate expectations with overnight index swaps holding only a 0.1 correlation with price direction. The ECB and FED have continued to try and temper interest rate expectations with warnings of downside risks and pledges to continue stimulus efforts. However, as signs of stabilization mount and prices start to rise, policy decisions will become more difficult and yield expectations would grow in importance regarding price action for the pair. Conversely, if growth signs falter then waning risk appetite could weigh on the pair as it would remain its primary driver of price action.
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