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May 24, 2013
Flash: Beware risk fatigue - Societe Generale
FXstreet.com (Barcelona) - Sebastien Galy, Senior FX Strategist at Societe Generale is bullish USD as a core view for 2013 and beyond.
He comments that FX is a relative value instrument, and the expected reduction of Fed asset purchases later this year will support the USD, especially against the other major currencies, the euro, yen and sterling. He adds that as he expects to see further monetary easing by the BoJ, ECB and BoE, he sees the tangible prospect of a major monetary policy divergence ahead, but this is not the end of the global liquidity wave, just a reconfiguration of it.
He continues to note that Bernanke made clear that the Fed would not want to jeopardise financial market stability by shifting policy too abruptly, so one can be sure that Fed tightening will be gradual and tentative. He writes, “We expect JPY and CHF to weaken more over the longer term. We add a short EUR/JPY trade as a tactical hedge against short-term headwinds. The equity rally shows signs of fatigue on the back of Fed exit discussions heating up.”
He comments that FX is a relative value instrument, and the expected reduction of Fed asset purchases later this year will support the USD, especially against the other major currencies, the euro, yen and sterling. He adds that as he expects to see further monetary easing by the BoJ, ECB and BoE, he sees the tangible prospect of a major monetary policy divergence ahead, but this is not the end of the global liquidity wave, just a reconfiguration of it.
He continues to note that Bernanke made clear that the Fed would not want to jeopardise financial market stability by shifting policy too abruptly, so one can be sure that Fed tightening will be gradual and tentative. He writes, “We expect JPY and CHF to weaken more over the longer term. We add a short EUR/JPY trade as a tactical hedge against short-term headwinds. The equity rally shows signs of fatigue on the back of Fed exit discussions heating up.”