Great Graphic: Two-Year US-German Yield Differential and the Euro

We have shown this chart several times, but given the shift in recent weeks, we thought an update would be useful. 

This Great Graphic, composed on Bloomberg, shows the dollar against the euro (white line) and the 2-year interest rate differential between the US and Germany.    

We continue to be impressed with how well the rate differential tracks the spot movement, even though it is not quite as tight a fit as seen earlier this year.  

The interest rate differential has narrowed since early July as the 2-year German yield has risen by about 10 bp and the US 2-year yield has eased about 5 bp.  The dollar has fallen by about 4% during that period.