22 Jul 2014
EUR/USD: better off long - Societe Generale
FXStreet (Guatemala) - Kit Juckes, Global Head of Currency Strategy at Societe Generale is more inclined to go long EUR.
Key Quotes:
"US CFTC data show that as of last Tuesday at any rate, speculative positioning in the US FX futures market remains firmly short Euro. A short position was rebuilt in June ahead of the ECB meeting that delivered the latest attempt at getting money to flow more freely around the Euro Zone, and that a short has maintained its size despite EUR/USD being range-bound ever since."
"There is some com for in the (now slightly reduced) long GBP position, some of which reflects an EUR/GBP short that IS working, but overall, it remains a frustrating environment for Euro bears. Friday's current account data, which continue to show vast inflows of money into European bond and equity markets, adding to the inflow of cash from the current account surplus, explain why short positions are frustrated so much of the time, and perhaps also why they are inevitable."
"Europe's 'basic balance' of long-term capital flows and current account continues to be in surplus by over EUR 300bn per annum, and this must have an offsetting short-term capital flow in the other direction. But the image of the FX market making the balance of payments balance by running a short position of that magnitude in the face of such repeated disappointment isn't a pretty picture."
"Where now? I really thought that we had a chance of breaking below 1.35 and holding there last week, but the briefest of flirtations with life in the 1.34s merely served to flush stops and increase the frustration."
"Still, model valuations show that as shorter-term rate differentials move inexorably in the dollar's favour, so the tide is still slowly turning against the Euro. With peripheral yields so low, and after a good run for European equities, the flood of money pouring in to Europe will surely slow and the currency eventually fall."
"Maybe 1.35 goes this week. But even if it does, shorting Euros will still feel like running uphill in mud.
Key Quotes:
"US CFTC data show that as of last Tuesday at any rate, speculative positioning in the US FX futures market remains firmly short Euro. A short position was rebuilt in June ahead of the ECB meeting that delivered the latest attempt at getting money to flow more freely around the Euro Zone, and that a short has maintained its size despite EUR/USD being range-bound ever since."
"There is some com for in the (now slightly reduced) long GBP position, some of which reflects an EUR/GBP short that IS working, but overall, it remains a frustrating environment for Euro bears. Friday's current account data, which continue to show vast inflows of money into European bond and equity markets, adding to the inflow of cash from the current account surplus, explain why short positions are frustrated so much of the time, and perhaps also why they are inevitable."
"Europe's 'basic balance' of long-term capital flows and current account continues to be in surplus by over EUR 300bn per annum, and this must have an offsetting short-term capital flow in the other direction. But the image of the FX market making the balance of payments balance by running a short position of that magnitude in the face of such repeated disappointment isn't a pretty picture."
"Where now? I really thought that we had a chance of breaking below 1.35 and holding there last week, but the briefest of flirtations with life in the 1.34s merely served to flush stops and increase the frustration."
"Still, model valuations show that as shorter-term rate differentials move inexorably in the dollar's favour, so the tide is still slowly turning against the Euro. With peripheral yields so low, and after a good run for European equities, the flood of money pouring in to Europe will surely slow and the currency eventually fall."
"Maybe 1.35 goes this week. But even if it does, shorting Euros will still feel like running uphill in mud.