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Global bond rout keeping euro hovering at two-month peak versus greenback

Economy Materials 8 May 2015 18:06 (UTC +04:00)
Pierre Magnussen at Saxo Bank's FX Options desk in Copenhagen says the yield in bunds has been driving the quick move
Global bond rout keeping euro hovering at two-month peak versus  greenback

Pierre Magnussen at Saxo Bank's FX Options desk in Copenhagen says the yield in bunds has been driving the quick move in EURUSD. He says: "The spread between US government 10-year yields versus German government 10-year yields has narrowed this morning to below 1.60 and last time we saw that was in late February at which point EURUSD traded at 1.14."

If we see a continued narrowing of the spread, EURUSD could rise towards 1.15, says Magnussen.

While the big moves in EURUSD is also impacting the equities world. Saxo's head of equity strategy, Peter Garnry, is still long-term bullish on European equities.

"The direction for the euro is still weaker against the dollar and other currencies," he says, "and we still think the actions of the European Central Bank will push down rates longer term."

He points to high achieving stock such as Siemens, ING, ArcelorMittal ans EON - firms which have all beaten earning estimates.

It's a different story for Chinese giant Alibaba, though, which is anticipated to experience a dip in earnings and sales growth, and has reportedly initiated a hiring freeze. "Something is definitely brewing at Alibaba", warns Garnry.

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