19 Dec 2014
Stay short European currencies vs. the USD – SG
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Research at Societe Generale, sees the equity-sensitive EM and high-beta currencies staging a relief rally with global equities continuing to rally, further suggesting to go short on European currencies vs. the USD and long for USD/JPY.
Key Quotes
“Global equities are continuing to rally and US Treasury yields are moving higher, with the longer end under-performing as negative-carry flatteners are cut back ahead of year’s end. It’s a neat trick to have rates markets reacting to a ‘more hawkish than expected’ FOMC and the equity market rallying in relief that they were not too hawkish. This tells us about market positioning as much as anything else."
“The FX reaction is to see equity-sensitive EM and high-beta currencies stage relief rallies, while the more rate-sensitive ones are relatively vulnerable. Stay short European currencies vs. the US dollar and most of all, stay long USD/JPY.”
“The US rate move has seen sharp widening in relative spreads with Euros, notably at the front end of the curve where the 2-year rate spread is wider that it was in October now. Some relief in European risk sentiment provide a bit of support for the Euro but the trend is firmly lower.”
“Meanwhile, the SNB rate cut/introduction of negative deposit rates had a big initial impact on EUR/CHF that has already been partially reversed – but does reinforce the case for longs in USD/CHF and also in GBP/CHF.”
Key Quotes
“Global equities are continuing to rally and US Treasury yields are moving higher, with the longer end under-performing as negative-carry flatteners are cut back ahead of year’s end. It’s a neat trick to have rates markets reacting to a ‘more hawkish than expected’ FOMC and the equity market rallying in relief that they were not too hawkish. This tells us about market positioning as much as anything else."
“The FX reaction is to see equity-sensitive EM and high-beta currencies stage relief rallies, while the more rate-sensitive ones are relatively vulnerable. Stay short European currencies vs. the US dollar and most of all, stay long USD/JPY.”
“The US rate move has seen sharp widening in relative spreads with Euros, notably at the front end of the curve where the 2-year rate spread is wider that it was in October now. Some relief in European risk sentiment provide a bit of support for the Euro but the trend is firmly lower.”
“Meanwhile, the SNB rate cut/introduction of negative deposit rates had a big initial impact on EUR/CHF that has already been partially reversed – but does reinforce the case for longs in USD/CHF and also in GBP/CHF.”