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17 Jan 2013
Forex Flash: Schlagobers (Whipped Cream) – Societe Generale
FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that markets in general have got stuck in a bit of a snowstorm as the strong risk rally that we´ve seen since the start of the year has run out of steam and investors are looking for new driving forces.
He feels that overall patterns to economic data are now familiar, with strong manufacturing output in the US for December contrasting with soft European car registrations. He highlights that he has revised his 2013 China GDP forecast up to 7.8% from 7.4%.
The overnight news came from Australia saw a rise in unemployment to 5.4%, as employment fell by 5,500. He adds, “The rates market has been extremely divided in its view of how much more easing we can expect from the RBA, and indeed about the outlook for the economy as a whole. Iron ore prices have recovered and money is flowing into Asian assets and currencies with gusto, but the Australian dollar still trades like a very overvalued currency, and AUD/USD still looks like a ceiling. We may drift towards the bottom of the 1.03-1.06 range in the coming days.”
In a week where equities have run out of steam, Juckes sees that markets are carefully watching the BoJ to deliver ´something´ to justify a sharp fall by the currency and while the market is clearly short of the Yen, the scale of the rally has been mild, and only 1% off of its lows. He writes, “If the BoJ does deliver further easing, a move through 90 is likely next week.”
Looking back to Europe, he notes that a dearth of news has strandered the Euro in a range and eventually, when the rally in peripheral bond markets runs out of steam, he feels that EUR/USD will re-focus on the transatlantic growth divide and weaken. However, he feels that it is too early for strategic Euro shorts.
He feels that overall patterns to economic data are now familiar, with strong manufacturing output in the US for December contrasting with soft European car registrations. He highlights that he has revised his 2013 China GDP forecast up to 7.8% from 7.4%.
The overnight news came from Australia saw a rise in unemployment to 5.4%, as employment fell by 5,500. He adds, “The rates market has been extremely divided in its view of how much more easing we can expect from the RBA, and indeed about the outlook for the economy as a whole. Iron ore prices have recovered and money is flowing into Asian assets and currencies with gusto, but the Australian dollar still trades like a very overvalued currency, and AUD/USD still looks like a ceiling. We may drift towards the bottom of the 1.03-1.06 range in the coming days.”
In a week where equities have run out of steam, Juckes sees that markets are carefully watching the BoJ to deliver ´something´ to justify a sharp fall by the currency and while the market is clearly short of the Yen, the scale of the rally has been mild, and only 1% off of its lows. He writes, “If the BoJ does deliver further easing, a move through 90 is likely next week.”
Looking back to Europe, he notes that a dearth of news has strandered the Euro in a range and eventually, when the rally in peripheral bond markets runs out of steam, he feels that EUR/USD will re-focus on the transatlantic growth divide and weaken. However, he feels that it is too early for strategic Euro shorts.