Filed Under:
Forex pairs in this Article » EUR/USD, GBP/USD
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale is not expecting EUR/USD to decline significantly, any time soon, but can see 1.20 within 3 months.

Key Quotes

"Meanwhile, in the day job .... my absurdly simple model of EUR/USD continues to urge me to sell volatility rather than to expect the Euro to break lower, unfortunately."

"Since EUR/USD was trading above 1.38 at the end of October there has been a 5(!) basis point fall in 2-year Euro swap rates relative to dollars, and the effect of that is offset by a further 30bp tightening in the Bono/Bund spread over the same period. This doesn't give me encouragement to look for the current move to go further as the ECB meeting approaches. The risk now is that the market is disappointed by ECB inaction."

"Longer-term, with peripheral spreads steady and with the Euro less vulnerable to weakness in ‘risk off' periods, the driver is going to be relative rate trends and in particular, what the Fed does more than what the ECB does. And that suggests that the bulk of any Euro downside will come when markets get a lot more excited about Fed rate hikes, rather than tapering.

“In short, EUR/USD 1.20 is a 3-year target, and range-trading can continue for a while longer. Meanwhile, the 40bp by which UK 2-year rates rose more than dollar ones between July and December, is over and as that spread narrows again GBP/USD shorts remain a better risk reward trade, even if today sees services PMI data in the UK that should be positive, rising from 58.8 to 59.4."
comments powered by Disqus
Trading Center