2022.6.27

There have been short-term abnormal fluctuations in interest rate spreads recently

For the euro , two sets of interest rate differentials inside and outside are still used to observe changes in the exchange rate.

The euro exchange rate has always been under obvious pressure. In principle, it is because of energy security issues. Europe's attitude towards Russia has always been relatively tough. Due to energy issues, European economic expectations have dropped significantly. At the same time, the obvious split between the two sets of U.S. Treasury bond interest rate spreads also proves this on the side.

We observed the internal two sets of long- and short-end interest rate spreads, and the long-end interest rate spread showed a clear V-shaped reversal. Although it cannot be determined that the interest rate difference has reversed, it must have a certain degree of support for the euro exchange rate in the short term. The short-end spread structure also appeared a pattern similar to a double bottom .

As the Fed raises interest rates, the European Central Bank has also made clear its attitude, and its expectations for future interest rate hikes by the European Central Bank are also clear. So I can't rule out the external long-end spread as a result of the ECB rate hike.

The long-end spread broke the volatile range, but the overall strength was not very strong.

The short-term interest rate spread also broke out of the range at the same time, and in principle, it began to show a state of obvious stabilization.

The exchange rate still needs to be observed. There are signs of a double bottom on the technical chart, but I am not sure whether the price trend can be maintained. The feeling of staring at the disk is that the euro itself is still in a relatively weak state.

There is also a big question: the ECB said that after raising interest rates, there will be new tools to maintain the health of internal interest rate spreads, but the tools the ECB can use seems to be limited. If this doubt can be dispelled, then it is expected that the euro will have a more obvious rebound.