The Bund yield and EURUSD in real time

[Fairman]

The Bund yield and EURUSD in real time

The spread between German and US government bond yields is one of the main drivers of EURUSD. When US yields rise faster than German ones, the dollar tends to strengthen against the euro.

Bond markets react to data a fraction of a second before currencies in many cases. The yields are traded on deep, regulated venues with centralized prices, and some information shows up there first.

Watching the yield differential on a second screen gives a hint of the pressure on EURUSD. If the spread widens in the dollar's favor, EURUSD tends to follow lower. If the currency pair is moving but the spread isn't, the move may lack fundamental support and be more fragile.

The relationship isn't constant. During risk-off episodes, correlations break. And on some days, EURUSD is driven by equities or by headlines unrelated to rates.

For scalping, the value is in context. A short-term move that is aligned with the bond market is more likely to continue than one that isn't.

Fast and reliable yield data for a retail trader: which source has held up?