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2 Jan 2015
EUR/USD preparing to test 1.20 – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale, believes that EUR/USD is preparing to test 1.20 levels, further adding that negative ECB rates are affecting the currency which is no longer being driven by capital flows.
Key Quotes
“We already know that global FX reserves probably peaked in Q3. IMF Cofer data also show the Euro share of those reserves is falling. The fall in reserves is far bigger than can be explained by valuation effects and reflects, mostly, the aversion of reserve mangers to negative deposit rates. The same theme is visible in Euro Area balance of payments data, which show a sharp increase in the amount of money deposited abroad by Europeans (as opposed to being invested in bonds, equities and so on).”
“Negative ECB rates seem to be having the desired effect on the currency, which is no longer being driven by capital flows associated with European sovereign risk (so tighter Spain/German spreads this morning are not providing support).”
“Meanwhile, Mario Draghi warns (in an interview with Handelsblatt) that he can't exclude the risk of deflation in the Euro, and says the ECB is engaged in ‘technical preparations to alter the size, speed and composition of our measures at the beginning of 2015, should this become necessary'.”
“EUR/USD is preparing to test 1.20 and the end-2015 EUR/USD consensus forecast of 1.18 may be one of the first to be adjusted...”
Key Quotes
“We already know that global FX reserves probably peaked in Q3. IMF Cofer data also show the Euro share of those reserves is falling. The fall in reserves is far bigger than can be explained by valuation effects and reflects, mostly, the aversion of reserve mangers to negative deposit rates. The same theme is visible in Euro Area balance of payments data, which show a sharp increase in the amount of money deposited abroad by Europeans (as opposed to being invested in bonds, equities and so on).”
“Negative ECB rates seem to be having the desired effect on the currency, which is no longer being driven by capital flows associated with European sovereign risk (so tighter Spain/German spreads this morning are not providing support).”
“Meanwhile, Mario Draghi warns (in an interview with Handelsblatt) that he can't exclude the risk of deflation in the Euro, and says the ECB is engaged in ‘technical preparations to alter the size, speed and composition of our measures at the beginning of 2015, should this become necessary'.”
“EUR/USD is preparing to test 1.20 and the end-2015 EUR/USD consensus forecast of 1.18 may be one of the first to be adjusted...”