Euro Rally Ripe for Reversal
Recent economic data in the U.S. have been mixed, and this does increase the chances for delays in policy changes from the Fed. But when we look at the broader environment, all indicators suggest that the Fed will be the first of the major central banks to unwind its stimulus programs.
Second-quarter GDP in the eurozone turned positive, at 0.3%, marking an end to 18 months of declines. But it is important to remember that these improvements have been largely unbalanced, with peripheral nations (Spain, Portugal, Italy, Ireland and Greece) not even close to approaching positive territory.
Unemployment remains elevated at 12.1% across the region, and all of this points to a diverging rate outlook and a weakening currency when compared to its U.S. counterpart. Use the latest strength in the CurrencyShares Euro Trust ETF as an opportunity to sell.
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