EUR weakness to extend further - Societe Generale

By FXstreet.com | August 20, 2014 AAA

FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, expects the selling interest to persist around the EUR.

Key Quotes

"Over the really long term, the dollar tracks real US rates as closely as it tracks anything (see the charts for a long-term view and a short one). In the long run, TIIPS yields have troughed, real rates are going to normalise over time and that is going to give the dollar a lift, even if we're a million miles from the Vocker-style monetary policy that delivered a DXY rally from 84 to 164 between 1980 and 1985."

"In the short run, even if Jackson Hole will be a Doves Convention, TIIPS yield are edging higher. My new colleagues at New Edge in New York, like buying puts in far-out Eurodollar futures, noting in particular that the 40-tick rally in Z7 from the end of July has run out of steam and could reverse in the days/weeks ahead."

"Soft wages and soft CPI have taken 2yr Note yields from 51bp to 41bp in two weeks but that too, is enough. Better housing data could even be followed by marginally hawkish FOMC Minutes and then we'll have to start getting ready for the August payroll report. We remain long USD/JPY, GBP/USD has peaked, we expect to see softness in AUD/USD and NZD/USD ahead and we look for EUR/USD softness to continue too."

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