Euro’s Gentle Ascent Amid Stiff German Sentiment
After a steady and almost unnoticeable climb, the euro is now +0.06% against the US dollar, riding a four‑day momentum that seems almost too tidy.
Why the German Economic Pulse Is Going Kaput
- German sentiment has collapsed from 19.2 to a meager 3.6 – the most drastic slide in nearly a year.
- Euro‑zone sentiment mirrors the fall: from 17.9 down to 9.3.
- Investors feel the looming recession, as confidence in Germany’s six‑month outlook takes a nosedive.
In plain English, investors are now feeling less cheerful about Germany’s economic prospects than ever before, and the Europe‑wide outlook has taken a swift tumble.
Euro Gains Fly Like a Feather, Fed Cuts in the Wind
Despite this gloom, the euro is getting a boost from a new favorite of market speculators: the possibility of a quick 0.5‑point rate cut by the Federal Reserve. Even a sharper lift in US core inflation hasn’t squashed the rally.
- The CME FedWatch Tool now points to a 69% chance that the Fed will slash rates.
- That expectation has weighed the dollar and Treasury yields down, making the euro look more appealing.
- US data, especially the bruising July non‑farm payrolls, has stoked fears of deeper trouble on both sides of the Atlantic.
Yield Gaps Narrowing, Euro Glowing
The spread between US Treasuries and German Bunds is at its lowest level since last August – a width of just 1.496%. While real yields on Treasury bonds stay in the positive zone, Bunds have slipped into negative territory for more than ten days straight.
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