Euro Vulnerability Spreads as French-German Bond Gap Widens to 130bp

The euro's correlation with widening eurozone spreads may accelerate rapidly, according to historical trends. The French budget announcement has left OATs vulnerable to further underperformance, potentially impacting the EUR/USD exchange rate.

Today's market chatter centers on the widening of eurozone spreads finally spilling over into the euro. The French-German 10-year spread has reached 130bp, with both EUR/CHF and EUR/USD facing similar depreciation potential.