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ING argues that the gap between neutral interest rates (r-star) in the Eurozone and the US may explain EUR/USD better than current rate spreads. The analysis notes that the dollar has decoupled from rate differentials and may be entering a regime change.
Its estimates are based on data released with a lag.
If the neutral-rate gap drives the dollar, the currency's direction over coming months becomes harder to call, which adds uncertainty to US commodity export pricing. The effect on feed prices is indirect and depends on how the Fed's end-point is priced.
think.ing.comViraj PatelFeb 26, 2018After 359 past neutral macro events, US Dollar (Broad) moved a median -0.0% over 5 sessions (49% higher; middle half -0.4% to +0.4%), and -0.1% over 20.
After 129 past neutral macro events, Euro (USD per EUR) moved a median -0.1% over 5 sessions (45% higher; middle half -0.5% to +0.5%), and +0.1% over 20.
Moves of each commodity's benchmark from the last close before the event. Historical reads pool past events of the same kind; they describe what happened, not what will. Not investment advice.
