6 Jun 2014
ECB easing not enough? - Societe Generale
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, expresses his doubts regarding the effectiveness of the ECB measures.
Key Quotes
"The ECB's heading into the unknown, risking the unintended consequences of a negative deposit rate as it seeks to stave off deflation, revive lending and weaken the Euro. Yesterday's moves provide some cheap funding for banks, but I doubt they do much to remove the risk of goods price deflation, boost credit creation, or weaken the Euro."
"But if you haven't got the message that this close to the zero bound, monetary policy does more for asset prices than for the economy, you haven't been awake for the last couple of years. So, I expect the ECB's measures to do more for Eurostoxx, iTraxx XO, even peripheral spreads, than for the economy."
"So, stay short the Euro, not against the dollar but against higher-yielding European currencies that will gain in a risk-friendly world. Stay Short Euro vs GBP, NOK, PLN and TRY."
Key Quotes
"The ECB's heading into the unknown, risking the unintended consequences of a negative deposit rate as it seeks to stave off deflation, revive lending and weaken the Euro. Yesterday's moves provide some cheap funding for banks, but I doubt they do much to remove the risk of goods price deflation, boost credit creation, or weaken the Euro."
"But if you haven't got the message that this close to the zero bound, monetary policy does more for asset prices than for the economy, you haven't been awake for the last couple of years. So, I expect the ECB's measures to do more for Eurostoxx, iTraxx XO, even peripheral spreads, than for the economy."
"So, stay short the Euro, not against the dollar but against higher-yielding European currencies that will gain in a risk-friendly world. Stay Short Euro vs GBP, NOK, PLN and TRY."