EUR/USD: Interest Rate Differentials Move Against EUR

Trichet's slight rhetorical shift in a dovish direction (despite voluminous hawkish talk) has helped widen interest rate differentials in favor of the USD today. 10-year yields spreads have widened to 60.5 bp from 57.5 bp earlier today. Spreads have been falling for a month on the growing notion that the Fed could cut rates as early as June while the ECB was seen hiking at least one more time after today's move. No the market is much less certain. EUR/USD is consolidating losses, trading now at 1.3128. 1.3140/45 is resistance near-term.