Breaking into the euro

摘要

The forex market has swung into action recently with big moves taking place in the U.S. dollar. After a period of historically low levels of volatility, these recent trends are music to the ears of momentum traders. With the Fed's taper due for completion, the market is shifting toward the anticipation of a normalization of rates through increases. This is driving investment into the U.S. dollar. The funding for that investment is coming from areas of the world where the there is an expectation of future easing as a result of economic weakness, as from the ECB. Therefore, we have diverging monetary policy between the Fed and the ECB. Diverging markets are what creates strong FX trends as capital hustles towards the higher yielding currency.