4 Jun 2015
EUR/USD recovery a good opportunity to rebuild shorts – BNPP
FXStreet (Barcelona) - According to BNP Paribas, the Bond net supply dynamics are set to improve and EUR/USD rallies must be faded.
Key Quotes
“We favour fading the recent rise in the EUR. The ECB delivered overall a dovish message, with President Draghi reaffirming the central bank’s firm intention to implement its full program of asset purchases despite recent improvement in CPI and noting recent re-weakening of data. However, bond markets appear to have been hoping for some reassurance that the central bank would act to address recent increases in volatility in fixed income.”
“Draghi’s message that markets would need to get accustomed to a higher level of volatility and failing to signal that the ECB would address liquidity mismatches discussed have been the drivers of higher Bund yields and the EUR’s move higher.”
“Going forward, however, our rate strategists highlight that the net supply picture is better for bonds as we move into the summer months and expect better performance for European bonds ahead.”
“Coupled with EURUSD no longer appearing cheap according to STEER and short EUR positioning having been reduced substantially, the EUR's latest recovery as a good opportunity to re-enter EUR shorts.”
Key Quotes
“We favour fading the recent rise in the EUR. The ECB delivered overall a dovish message, with President Draghi reaffirming the central bank’s firm intention to implement its full program of asset purchases despite recent improvement in CPI and noting recent re-weakening of data. However, bond markets appear to have been hoping for some reassurance that the central bank would act to address recent increases in volatility in fixed income.”
“Draghi’s message that markets would need to get accustomed to a higher level of volatility and failing to signal that the ECB would address liquidity mismatches discussed have been the drivers of higher Bund yields and the EUR’s move higher.”
“Going forward, however, our rate strategists highlight that the net supply picture is better for bonds as we move into the summer months and expect better performance for European bonds ahead.”
“Coupled with EURUSD no longer appearing cheap according to STEER and short EUR positioning having been reduced substantially, the EUR's latest recovery as a good opportunity to re-enter EUR shorts.”