EURUSD enjoyed two well defined phases in the first half of the year. The first was a bearish move from January until March, mainly driven by the successful vaccination rollout in the US, Biden’s fiscal expansion and the improvement of the macro outlook for the US cycle, which triggered a steepening of the US Treasuries curve. The second was a bullish move through mid-June, favoured by the adjustment in speculative positioning during April and May, the vaccination catch-up in the EMU, some divergence in the macro data and the flattening of the UST curve. The Fed’s more bullish pivot brought the cross down again, but it stayed within a tight range. We ask ‘where do we go from here’, as different drivers are pulling in different directions and need to be calibrated.
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