22 Jan 2015
EUR/PLN best euro short into the ECB QE impact – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale, shares that EUR/PLN might be the best ‘euro’ short if the size of the QE program is big enough to be euro negative.
Key Quotes
“For the euro, the more short-dated rates/yields are driven down, the worse it is for the currency. Conversely, if peripheral spreads tighten, or at least do not widen, particularly beyond 5 years, that is euro-supportive. So too are tightening credit spreads and rallying equities.”
“Negative short-dated yields are a powerful tool for forcing savings out of banks/bonds, but are counter-balanced if there is greater attraction to other euro-denominated assets.”
“The FX market will take its cue from how others react, and the more peripheral bonds and equities hold up, the greater the risk of a short-covering rally. Only if long-dated peripheral spreads are spooked by the national-level risk-taking will the euro's fall continue without any kind of bounce.”
“We still expect EUR/USD below 1.10 before long but today, the ‘best' euro short may be one from our EM colleagues. Short EUR/PLN looks like a decent bet if the size of the package is big enough to be euro negative, and if the markets aren't immediately spooked by where the credit risk resides.”
Key Quotes
“For the euro, the more short-dated rates/yields are driven down, the worse it is for the currency. Conversely, if peripheral spreads tighten, or at least do not widen, particularly beyond 5 years, that is euro-supportive. So too are tightening credit spreads and rallying equities.”
“Negative short-dated yields are a powerful tool for forcing savings out of banks/bonds, but are counter-balanced if there is greater attraction to other euro-denominated assets.”
“The FX market will take its cue from how others react, and the more peripheral bonds and equities hold up, the greater the risk of a short-covering rally. Only if long-dated peripheral spreads are spooked by the national-level risk-taking will the euro's fall continue without any kind of bounce.”
“We still expect EUR/USD below 1.10 before long but today, the ‘best' euro short may be one from our EM colleagues. Short EUR/PLN looks like a decent bet if the size of the package is big enough to be euro negative, and if the markets aren't immediately spooked by where the credit risk resides.”