FXStreet (Guatemala) - Kit Juckes, Global Head of Currency Strategy at Societe Generale is shorting EUR/USD.
"The Fed and the reaction in the Treasury market however, only briefly distracts from the divergence in US and European rates markets. Just 2 months ago, Euro and US 2-year swap rates were at the same level."
"Since then, Euro rates have fallen sharply and Us ones risen equally sharply and the gap is 30bp. Not a huge gap but it's an awfully long time since they last moved in completely different directions."
"Obvious, you say: The US economy is growing much faster than Europe's, the Fed is talking about tightening, one day, and the ECB probably isn't done easing. But still, this policy and short rate divergence has come with a bang in recent weeks and has an awfully long way to go."
"2yr US rates rose by 150bp in the three months before the start of the 2004-2007 rate cycle and while we're a lot more than 3 months away from the start of the first move, I think we'll get the same market reaction. Short 5yr US vs 5yr Euros will go on working and yesterday's US move is a chance to get in. Short EUR/USD will follow the rate move and while I still want to wait until the end of the summer to go short EUR/USD (somewhere in a 1.35-1.40 range) we're getting there.