27 Sep 2013
Flash: EUR/USD is peaking - Societe Generale
FXstreet.com (Barcelona) - As Sebastien Galy, Currency Strategist at Societe Generale, notes, the reasons to remain short EUR/USD entered at 1.3460 remain.
Key Quotes
"The peak of portfolio inflows into the eurozone and its periphery which started in August is likely approaching as European valuations become less attractive relative to the US."
"Credit risk in the European periphery is now almost priced out of EUR/USD according to our models."
"Relative monetary policy will increasingly drive the currency, favoring the USD as the Fed is increasingly at risk of being caught behind the curve."
"EUR/USD is almost priced to perfection. The risk linked to peripheral Europe has collapsed in 2013, with foreign investors rushing back into European stocks and credit. Assuming this credit risk disappears, EUR/USD would be trading not too far from our estimate, namely 1.3640 based on a 90% quantile (250bp of peripheral risk premium)."
Key Quotes
"The peak of portfolio inflows into the eurozone and its periphery which started in August is likely approaching as European valuations become less attractive relative to the US."
"Credit risk in the European periphery is now almost priced out of EUR/USD according to our models."
"Relative monetary policy will increasingly drive the currency, favoring the USD as the Fed is increasingly at risk of being caught behind the curve."
"EUR/USD is almost priced to perfection. The risk linked to peripheral Europe has collapsed in 2013, with foreign investors rushing back into European stocks and credit. Assuming this credit risk disappears, EUR/USD would be trading not too far from our estimate, namely 1.3640 based on a 90% quantile (250bp of peripheral risk premium)."