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Flash: Pressure is building - Societe Generale

FXstreet.com (Barcelona) - Societe Generale strategists note that the average EUR/USD annual range from high to low is 20%, similar to that of the USD/DEM in the post-Bretton Woods era.

They continue to comments that since 1973, the biggest annual change has been 1985’s 22% dollar fall, and write,, “but if we could stop the clock today, 2012’s has been the smallest annual move (0.1%) and the third smallest range (1996 and 1976 were more boring still).” They see that the same analysis for USD/JPY makes this the third tightest range since 1973 too, and the overall move at 6.8%, is just over half the average.

Continuing, they add that the FX market is calm as the shock of the credit bubble bursting (in 2008) and the Euro crisis exploding (in 2009) lessen with time and this was much the same as in 1996 (as the events of 1992 faded) and 1976 (when the impact of the collapse of Bretton Woods was likewise fading). They note that the most-traded FX pairs are ‘in-between’ major shocks, continuing to add that what happened next, the last time we saw this degree of relative G3 FX calm, was the Asian crisis. They write, “In 1997, the IDR fell by over 50% against the US dollar, and the Turkish lira, S Korean won and Thai Baht were not far behind, as Fed policy normalisation burst emerging market FX bubbles. They feel that 2013 won’t play out like that because the Fed is very unlikely to tighten policy, but the asset bubbles which have been filled with the cheap liquidity the Fed and ECB need to ‘save’ the western financial system, are under notice that a corner is being turned.”

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