10 Dec 2013
Flash: Ground hog day in EUR Champagne – Societe Generale
FXstreet.com (London) - Sebastien Galy looks into the current climate surrounding the EUR.
Key Quotes:
“If we were in 2009, I would have said that the EUR is bound to be strong, suffering from waves of risk aversion before going back up, courtesy of a much better balance sheet than the US. The risk aversion was linked to Spain at the time, a long standing case, where IMF reports of the 1990s were as relevant as then”.
“If we were in jan 2010, I would have said that the divergence in ULC was so extreme and bank positioning so stretched in USD that something was about to give in EURUSD. I ran my first quantile model to see how eurusd would react if yield widened between periphery and core, initially for a major US name. That methodology spread and was convenient to price eurchf and its vol”.
“It all comes down once again to the Fed and the move in 2s to increasingly enter the hiking part of the cycle as each month goes by”.
Key Quotes:
“If we were in 2009, I would have said that the EUR is bound to be strong, suffering from waves of risk aversion before going back up, courtesy of a much better balance sheet than the US. The risk aversion was linked to Spain at the time, a long standing case, where IMF reports of the 1990s were as relevant as then”.
“If we were in jan 2010, I would have said that the divergence in ULC was so extreme and bank positioning so stretched in USD that something was about to give in EURUSD. I ran my first quantile model to see how eurusd would react if yield widened between periphery and core, initially for a major US name. That methodology spread and was convenient to price eurchf and its vol”.
“It all comes down once again to the Fed and the move in 2s to increasingly enter the hiking part of the cycle as each month goes by”.