Perhaps the Euro move is more due to the fact the USD is slowly drifting lower as the economic condition of the U.S. has been turning. However, looking at the Financial Conditions index does not show that there is any slowing as of yet. So, it must either be an unwinding of the short positions or maybe the financial conditions in Europe are actually improving.

Hard to believe that the latter is true, but seen from the perspective of the Bloomberg Financial Conditions Index, it may just be.

The Bloomberg Financial Conditions Index combines yield spreads and indices from the Money Markets, Equity Markets, and Bond Markets into a normalized index. The values of this index are z-scores, which represent the number of standard deviations that current financial conditions lie above or below the average of the 1994-June 2008 period.

Europe: