The Daily Shot

By SoberLook


Let’s begin with a few developments in the Eurozone.

1. The ECB balance sheet is approaching its 2012 peak – the central bank has been quite busy in May. The Eurozone’s monetary base hit a new high.

Source: ECB

Source: ECB

2. The ECB action (above) combined with weak employment data out of the US sent the average yield on German government bonds below zero for the first time.

Source: @fastFT

3. German factory orders dropped sharply, missing expectations by a significant margin. Both foreign and domestic demand has weakened.

Source: Statistisches Bundesamt

4. The short-term rate differential with the US suggests that the euro should weaken. However, the inflation-adjusted rate differential isn’t as large. Combine that with a more dovish Fed and all the talk of the euro going to parity remains just talk – for now.

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