Back
22 Jun 2015
USD will resume its upside in the longer run – Societe Generale
FXStreet (Edinburgh) - Strategist Kit Juckes at Societe Generale sees the US dollar weakening further in the near term, while picking up pace in the longer run.
Key Quotes
“Last week’s CFTC data show a further reduction in Euro shorts and a further reduction overall in USD longs. The dollar index has been tracking the positioning reasonably faithfully”.
“Meanwhile, relative rates are still favouring the Euro. You could be forgiven for thinking that the biggest driver of the EUR/USD rate is not Greek debt talks, but the pricing of the December 2016 Fed Funds futures contract”.
“This closed on Friday at 1.02%, the lowest level since mid-May. Anything other than complete failure in today’s Greek debt talks, will leave us watching the front end of the US curve as the driver of FX trends”.
“The only US data today is the Chicago Fed index and Existing Home sales for May. Neither is high profile enough to change market thinking about Fed policy, which prices a 1% rise in rates over 18 months. That compares with a 2% rise in rates in the first 12 months of the last hiking cycle, 175bp in the first year of the 1999-2000 cycle and 3% in the first year of the 94-95 cycle. There’s ‘gradual’ and then there’s what we are currently pricing”.
“All of which just suggests we will get a stronger dollar once a faster pace of fed rate hikes is priced in, but this needs a catalyst that today's data won't provide. In the meantime, we watch the combination of (super-low) Fed pricing and hope of a Greek deal boost risk sentiment and undermine the dollar for the start of the week”.
Key Quotes
“Last week’s CFTC data show a further reduction in Euro shorts and a further reduction overall in USD longs. The dollar index has been tracking the positioning reasonably faithfully”.
“Meanwhile, relative rates are still favouring the Euro. You could be forgiven for thinking that the biggest driver of the EUR/USD rate is not Greek debt talks, but the pricing of the December 2016 Fed Funds futures contract”.
“This closed on Friday at 1.02%, the lowest level since mid-May. Anything other than complete failure in today’s Greek debt talks, will leave us watching the front end of the US curve as the driver of FX trends”.
“The only US data today is the Chicago Fed index and Existing Home sales for May. Neither is high profile enough to change market thinking about Fed policy, which prices a 1% rise in rates over 18 months. That compares with a 2% rise in rates in the first 12 months of the last hiking cycle, 175bp in the first year of the 1999-2000 cycle and 3% in the first year of the 94-95 cycle. There’s ‘gradual’ and then there’s what we are currently pricing”.
“All of which just suggests we will get a stronger dollar once a faster pace of fed rate hikes is priced in, but this needs a catalyst that today's data won't provide. In the meantime, we watch the combination of (super-low) Fed pricing and hope of a Greek deal boost risk sentiment and undermine the dollar for the start of the week”.