Trading the ever-diverging paths from the major G10 central banks has been one of the most successful thematics that have played through the markets for the...

Trading the ever-diverging paths from the major G10 central banks has been one of the most successful thematics that have played through the markets for the last couple of months. But has this trade become long in the tooth? Fundamentally, this divergence doesn't look like disappearing anytime soon. In fact, in the case of Europe it looks like the trade may still be in its infancy. As previously suggested, being short currencies where the central bank is trying to spur inflation (and predominately inflation expectations), while being long currencies in economies where we are likely to see more restrictive policy settings has a been a winner. The concern now is whether these extreme moves are negatively affecting underlying economics. (VIEW LINK)