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The euro slid lower in NY session today ending on the lows of the day as it flirted with the 1.2300 level. There was no specific news to drive the currency lower, but the rise in US 10Y along with the fall in GE 10Y yields helped to push the pair lower and the overall tone in the trade suggests that the pair could tumble lower as the week comes to as close.
As we noted earlier, “The concerted effort by ECB officials to talk the euro down indicates the realization by policymakers that the persistently high exchange rate for the currency is having deflationary impact on price levels. And while ECB officials are not considering any overt intervention measures, the form of soft jawboning is clearly an attempt to slow down the rise of the euro and keep it below the 1.2500 mark.
By all measures, the euro should be lower as interest rate differentials between US and Europe continue to expand, but chaotic White House policy, muted inflation data and so far sub-par growth in 2018 has cast doubt on the ability of the Fed to follow through with its hawkish talk.
Still, the much more adversarial tone of the Trump administration towards trade has forced EZ monetary authorities to pay careful attention to exchange rates, as businesses on the Continent are becoming increasingly concerned about punitive measures by Trump, that why they are likely to talk the unit down even as it declines, hoping to push it to 1.2200 or below