EUR/USD downside playing out, can dollar gain traction? - BBH

Analysts at Brown Brothers Harriman explained that if the dollar is going to get better traction against the euro, it will need a larger interest rate premium.    

Key Quotes:

"Often, we mind the direction of change is more important than the absolute level of the premium, but a larger premium may be needed to compensate for other risks, such a political risks.    

Our work finds that recently the US-German 10-year premium is more correlated with the euro (percentage change, 60-day rolling basis) than the two-year spread. The two-year correlation is 0.55 which, except for the January-March period has rarely been greater. The 10-year correlation is at 0.67. This is the most since at least 2000. "