Outlook for the Euro darkens further

We hear from Camilla Sutton at Scotiabank who says markets are, for now, ignoring the fundamental weakness behind the Euro.

Sutton says the outlook for the Euro has darkened:

"EURUSD is strong, up 0.2% since yesterday’s NA close, flirting once again with the higher end of its seven month range. As we approach the Fed meeting and the German election, there are renewed rumblings from several fronts of the weaknesses that face Europe.

"We expect that as this week’s major risk events pass, EUR might be poised to move lower.

"On a positive note, the single supervisory mechanism (SSM) has been agreed to, providing one piece of the banking union; however progress in other areas has been slow.

"The single resolution mechanism (SRM) has multiple hurdles ahead of it; while the asset quality review (AQR) will make headlines in the month ahead; and the outlook for both Portugal and Spain is still challenged, with both countries potentially requiring new aid programs in the future.

"Add to this the diverging policy paths between the Fed and ECB and the outlook for EUR darkens further.

"FX markets are so far ignoring the rising risks, but some bond markets are showing early signs of reacting."