4 Nov 2013
Flash: EUR/USD collapse driven entirely by ECB rate expectations - Societe Generale
FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale feels that last week's EUR/USD fall was driven entirely by ECB rate expectations falling faster than Fed rate expectations.
Key Quotes
“(When) EUR/USD is plotted against the Dec 2014 Eurodollar/Euribor spread and the relative rate move needs to go further to justify much more downside (though 1.32 is achievable).”
“The divergence between the two lines, for what it is worth, can be explained by the continued tightening in peripheral European spreads, which will be helped by Fitch raising its outlook on Spain's BBB rating to stable from negative.”
“Eurodollar futures are back to early May levels now, as the taper/no-taper story plays out. They may even be a decent risk-reward sell into the payroll numbers on Friday.”
“Euribor futures are still short of their May highs, despite the likelihood of more easing. That is why, despite the recent rally, we see some more scope for the front end to perform in Euro rates.”
“This can keep the Euro on a softening bias this week, but I'd much rather be short EUR/GBP (or EUR/NOK, or EURTRY if you fancy some EM catch-up).”
Key Quotes
“(When) EUR/USD is plotted against the Dec 2014 Eurodollar/Euribor spread and the relative rate move needs to go further to justify much more downside (though 1.32 is achievable).”
“The divergence between the two lines, for what it is worth, can be explained by the continued tightening in peripheral European spreads, which will be helped by Fitch raising its outlook on Spain's BBB rating to stable from negative.”
“Eurodollar futures are back to early May levels now, as the taper/no-taper story plays out. They may even be a decent risk-reward sell into the payroll numbers on Friday.”
“Euribor futures are still short of their May highs, despite the likelihood of more easing. That is why, despite the recent rally, we see some more scope for the front end to perform in Euro rates.”
“This can keep the Euro on a softening bias this week, but I'd much rather be short EUR/GBP (or EUR/NOK, or EURTRY if you fancy some EM catch-up).”