The weaker-than-expected U.S. Consumer Price Index (5.4% exp 6%) has boosted the Euro against Dollar to break above the important level of 1.10. However, we have to wait the confirmation, as it may be premature to conclude the continuation of bullish trend is still in place.
In this case, it can help the research that shows how the relationship between U.S. and German government bond yields (as a spread) can determine the EUR/USD exchange rate in the short run.
One of the best indicator is 2-year U.S. and German government bond yields: when the spread decreases, the USD declines against the euro and vice versa.
(Eur/Usd spot Vs 2y US-GER bond yields)
Edoardo Liuni