From Ashraf Laidi at The Market Oracle – ECB Peripheral Divergence and EUR/USD:
The divergence (contradiction) between rising peripheral Eurozone bond spreads and the rising euro caused many to question the sustainability of the currency’s rebound. How could the euro strengthen against all currencies in Jan-Mar despite rebounding bond yields in Greece, Portugal, Ireland and Spain? Something has to give…
Moving ahead (beyond Q2 2011), I expect the principal headwind to the Eurozone to emerge from the growth impact of surging oil prices on already subdued growth in Greece, Portugal, Ireland and Spain.