Spanish Spreads Rally To One-Year Tights As EURUSD Hits 3-Month Low

At the lows, the USD had its best gain in 9 months today, but a small give back into the European close leaves EURUSD back below 1.30 having hit its lowest in three months. It seems the EUR-USD exchange rate has recoupled perfectly with the Fed/ECB balance sheet shifts. Bond spreads are tumbling amid this 'devaluation' as Spain's 10Y spread to Bunds has dropped to its lowest in a year (though Italy remains well above one-year lows). Spanish stocks also surged - up 5.5% this week! And Europe's VIX has plunged back to one-month lows. What's not to like? Oh apart from the macro fundamentals that are crashing everywhere in Europe.

Spain notably outperforming Italy here... the periphery is becoming fragmented

 

as EURUSD weakness is now a good thing apparently...

 

recoupled with Fed/ECB balance sheet...

 

as European Stocks just smashed higher this week...

 

as European stocks join the 'ignore macro reality' game...

 

Charts: Bloomberg