Societe Generale Research discusses its current bias on EUR/USD, GBP/USD, and USD/JPY.
“Yesterday’s reaction was exaggerated thanks to the ‘inflation is
peaking’ narrative which fuelled the soft-landing story and helped
equities rally. Where do we go now? The dollar got a lift, but I don’t
think this latest surge can take us very far. The market has pushed up
pricing of terminal Fed Funds buy almost 50bp in a week, to above 4%,
but the Dollar Index is pretty much where it was a week ago. It
still seems more likely that EUR/USD, GBP/USD and most of the major
crosses settle for a period of choppy range-trading, with volatility
staying elevated, rather than we see the start of a new dollar uptrend,” SocGen notes.
“The yen, will remain very difficult to trade. It’s
been doing a good job of tracking long-term US rates, and a very poor
job of reacting to any moves in Japanese rates, assets, or economic
developments. The Government would like the market to stop selling it,
and a verbal intervention campaign has begun. But a change in monetary
policy doesn’t seem imminent,” SocGen adds.
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