Euro remains slightly vulnerable short term - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that the Friday’s Eurozone current and financial account data did nothing to alter a view of current Euro vulnerability and long-term, (major) potential upside.

Key Quotes

“The current account surplus reached EUR 47bn in December, and EUR 362bn over the year as a whole. It just keeps on growing. Meanwhile, bond flow data show foreigners were net sellers of EUR 197bn last year, EUR 66bn in December alone, while Europeans bought EUR 363bn in foreign bonds last year. So, huge current account surplus easily recycled with even bigger net outflows from bond investors thanks to ECB policies and perhaps investor nerves ahead of the French election that show up in foreigners shunning European bonds even if it doesn’t show up in yields.”

“Take away the political risk, take away a little more of the ECB buying and do anything to reverse the widening in the Treasury/Bund spread and the conditions for a very sharp Euro rebound would be in place. In the mean time, the Euro remains slightly vulnerable short term. And frustratingly rangebound”