Table – EZ Economy and Perf Since Last ECB Mtg

2012 eurusd forecast ECB ecb ltro Kathy Lien

The European Central Bank is gearing up for a monetary policy announcement tomorrow. Based on the following table, which shows broad based weakness in the EZ economy since the May meeting, they need to ease. Whether it happens now or in July is still an open question, but the central bank can’t sit by idly and do nothing for much longer.

Chart: EURUSD and 10 Yr Spanish Yields

2012 elections eurusd 2012 elections us dollar 2012 eurusd forecast ECB ecb rate cut eur/usd Kathy Lien

There’s been a lot of talk about Spanish 10 year bond yields rising to 7 percent. We’ve been at higher levels in 2011 but at that time the EUR/USD was trading much higher. 7 percent is a critical level because that is the rate that pushed Greece, Portugal and Ireland to beg for aid. The orange line is the EUR/USD and the white line is Spain’s 10 year bond yield. That divergence is looking ugly!