Great Graphic: Key Euro Trend Lines

This Great Graphic was created on Bloomberg.   It shows uptrend (white) the euro has held since ECB President Draghi committed to do whatever it takes to facilitate the survival of EMU.  

It shows a slightly steeper uptrend since mid-November (green) as the passive tightening in the euro area became increasing evident, especially in contrast to the Fed's decision in December to more than double the amount of long-term assets it was purchasing on an outright basis.  

However, since the start of the month, the euro has been trending lower (red line).  This has coincided with easing back of short-term euro rates and in particular the German two-year note.  It has resulted in shift of the spread (or swap) rate back toward the US.  Recall that 2-year differential was about 30 bp in the US favor in mid-Dec and it fell to a discount of 2 bp at the end of Jan.  As of yesterday , the US premium was nearly 10 bp, the most in nearly a month.  It is slipping back today, which would seem to be consistent with a euro recovery.  That said, the FOMC minutes later today is the wild card.  We suspect they may be more dovish than the market may expected, if it is looking for more concrete signals about an exit from QE.