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3 May 2013
Forex Flash: - We recommend selling the euro – Soc Gen
FXstreet.com (Barcelona) - The eur/usd had a roller coaster of a day, initially trading higher on the ECB Rate decision then reversing all gains during Mario Draghi’s press conference and closing the day down 123 pips at 1.3061. Some analysts believe the reversal is a sign of things to come and to expect further eur/usd weakness.
According to Sebastien Galy, Senior Currency Strategist at Soc Gen SA, “Soft US growth and inflation data have led the FOMC to revive the Bernanke put - through the threat of more QE. In the process the dollar has sold off through the turn of the month - its biggest correction so far this year. We see this as overdone. The FX market has priced a lot of soft US news; the new news is the Draghi put - a first for the ECB.”
He went on to add, “Risk signals have de-correlated of late, but overall risk conditions have been resilient to the global soft patch. Thank you again to the central bankers. Euro peripheral markets in particular have rallied strongly on better Italian news, the easy money-led quest for return and international pressure for growth-oriented policies. The non-core rally looks stretched. With the ECB talking up negative rates, we recommend selling the euro.”
According to Sebastien Galy, Senior Currency Strategist at Soc Gen SA, “Soft US growth and inflation data have led the FOMC to revive the Bernanke put - through the threat of more QE. In the process the dollar has sold off through the turn of the month - its biggest correction so far this year. We see this as overdone. The FX market has priced a lot of soft US news; the new news is the Draghi put - a first for the ECB.”
He went on to add, “Risk signals have de-correlated of late, but overall risk conditions have been resilient to the global soft patch. Thank you again to the central bankers. Euro peripheral markets in particular have rallied strongly on better Italian news, the easy money-led quest for return and international pressure for growth-oriented policies. The non-core rally looks stretched. With the ECB talking up negative rates, we recommend selling the euro.”