EURUSD has tumbled hard following the FOMC minutes as the much-hoped for 'we promise to print USD to infinity at the next meeting no matter what we see' phrase was missing. Two months ago [5], when the EURUSD was at 1.30, we asked if a 1000 pip move lower, based on relative central bank balance sheets, is in the cards. Today, we are 80% of the way there, with the Euro having tumbled 800 pips against the dollar as NEW QE gets priced further and further out - now implying a 20% likelihood of getting a new USD printing from the Fed within the next 3 months.
[6]
and perhaps more interesting, the ebulience in the Sovereign risk market of the last few days seems directly opposed to the weakness of the EUR; who is right? We hesitate to guess but for sure there is room for convergence to some reality.
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Charts: Bloomberg