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.
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.
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.NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas; or the free eLetter for an introduction to our work. You can also keep up to date with plenty of actionable public content at NFTRH.com. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.