The euro rose to a three-month high on Thursday, amid a shift in the global economic picture and a big move in European bond yields.
The recent month-long euro surge comes after a long losing streak. The dominant explanation behind the drop is that the U.S. economy has been seriously outperforming the euro zone economy, and the Federal Reserve is consequently set to raise rates. Both stronger economies and higher rates tend to make currencies more attractive.
But all of the sudden, the U.S. economy appears to be going through a bit of a soft patch. In the the first quarter, the U.S. economy grew at just a 0.2 percent annualized pace (or actually shrank, according to some more recent economist estimates) and economic data since then have been disappointing, such as Wednesday's goose egg of a retail sales-growth number. This has pushed back expectations for when the Fed will raise rates.
"If you go two months back, we were talking about, 'Is the Fed going to go potentially in June?' Now the debate is, 'Will the Fed be able to go at all this year?' So, a huge shift in sentiment," commented Jens Nordvig, global head of fixed income research at Nomura, in a Thursday "Power Lunch" interview.