23 Jul 2013
Flash: EUR rates out of whack – Societe Generale
FXstreet.com (London) - Kit Juckes Global Head of Currency Strategy at Societe Generale notes forward EUR rates.
Key Quotes:
“If there is anything particularly out of line in the Euro rate market now, it is that the market is pricing significantly higher rates in 12 months' time, by when I expect the ECB to have eased further”.
“The European crisis isn't getting markedly worse, and the ECB is still maintaining a wedge between the market and the underlying economic situation, but the 1yr forward Euro curve is some 30bo higher than the spot curve, and even if the big carry rally is over, that looks mighty appealing”.
“In FX, charts of Eur/USD against either relative rates or peripheral spreads (the biggest drivers of the euro) are both far more comforting for Euro bulls, than bears”.
“The 2yr/2yr rate spread is correcting as US rates fall back, and that points to a break higher for the Euro”.
“Peripheral spreads don't do anything to encourage the AEP-brigade or Euro bears. Europe still needs easier policy and needs a weaker euro”.
“Deflation in high-debt countries is no way to solve anything in the long term, and Euro-Japanification is a silly plan. But just because I think policies are wrong doesn't mean they will change soon”.
Key Quotes:
“If there is anything particularly out of line in the Euro rate market now, it is that the market is pricing significantly higher rates in 12 months' time, by when I expect the ECB to have eased further”.
“The European crisis isn't getting markedly worse, and the ECB is still maintaining a wedge between the market and the underlying economic situation, but the 1yr forward Euro curve is some 30bo higher than the spot curve, and even if the big carry rally is over, that looks mighty appealing”.
“In FX, charts of Eur/USD against either relative rates or peripheral spreads (the biggest drivers of the euro) are both far more comforting for Euro bulls, than bears”.
“The 2yr/2yr rate spread is correcting as US rates fall back, and that points to a break higher for the Euro”.
“Peripheral spreads don't do anything to encourage the AEP-brigade or Euro bears. Europe still needs easier policy and needs a weaker euro”.
“Deflation in high-debt countries is no way to solve anything in the long term, and Euro-Japanification is a silly plan. But just because I think policies are wrong doesn't mean they will change soon”.