EUR: renewed focus on relative central bank policy - Scotiabank

Analysts ay Scotiabank explained that the EUR is responding to the renewed focus on relative central bank policy. 

Key Quotes:

"Political concerns remain elevated however bund spreads have not moved significantly since Monday. The 2Y Germany-U.S. yield spread has pushed through 195bpts (middle chart), retracing roughly half of the narrowing from late December to late January, and the narrative of Fed-ECB divergence appears to have regained momentum following this week’s dovish comments from ECB President Draghi and hawkish comments from regional Fed voter Harker."

"Spain’s weaker than expected industrial production data provided for modest EUR weakness, however most of the decline had been observed prior to the release. Measures of sentiment are shifting in a bearish manner, with options markets showing a broad rise in measures of implied volatility and delivering a clear surge in the premium for protection against EUR weakness."