EUR jumps on the day – Scotiabank

The EUR advance has extended today as Germany’s fiscal reset promises massive spending increases on defence and infrastructure, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

Eurozone yields surge on higher German government spending

"Ramped up spending means higher government borrowing and higher domestic yields; 10Y bund yields jumped more than 20bps today before easing back slightly, dragging broader European yields along for the ride." 

"The sudden emergence of a possible Ukraine/US minerals deal late yesterday added to positive EUR sentiment. EZ/US 2Y spreads have narrowed to –179bps, thew narrowest since October when spot was trading around 1.08. There may be a little more upside in the EUR to come."

"Spot gains have extended quickly this week to test the EUR’s 200-day MA (1.0722) as expected. Spot gains have moderated after testing the 200-day benchmark, however and may settle back in the short run to digest recent gains. There is solid underlying momentum behind EUR gains on the short-term oscillators, however, which suggests limited downside potential and more upside risk (towards 1.08) in the short run. Look for firm support on dips to the 1.06 area."