9 Jun 2014
EUR to take bigger role as funding currency - RBS
FXStreet (Bali) - Greg Gibbs, FX Trading Strategist at RBS, takes note of the surge in European periphery sovereign and bank asset prices, saying that EUR is expected to take on a bigger role as funding currency for carry trades.
Key Quotes
"The significant easing measures implemented by the ECB may continue to reverberate through markets this week and boost global risk appetite further. Economic reports are also showing recovery with solid export performance reported by China (+7.0%y/y in May) and Malaysia (+18.9%y/y in Apr)."
"The World Bank is likely to upgrade its global growth forecasts this week. The JPMorgan/Markit Global manufacturing PMI rose from 52.8 to 54.3 in May, a high since Sep-13."
"However, we expect EUR to take on a bigger role as funding currency for carry trades. Euro rates across the curve are now below those in the US and 2 and 5 year swap spreads are at lows since at least 2007and negative, even though EUR is near its average over that period."
Key Quotes
"The significant easing measures implemented by the ECB may continue to reverberate through markets this week and boost global risk appetite further. Economic reports are also showing recovery with solid export performance reported by China (+7.0%y/y in May) and Malaysia (+18.9%y/y in Apr)."
"The World Bank is likely to upgrade its global growth forecasts this week. The JPMorgan/Markit Global manufacturing PMI rose from 52.8 to 54.3 in May, a high since Sep-13."
"However, we expect EUR to take on a bigger role as funding currency for carry trades. Euro rates across the curve are now below those in the US and 2 and 5 year swap spreads are at lows since at least 2007and negative, even though EUR is near its average over that period."