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Forex Flash: EUR/USD headed to 1.20 - Societe Generale

FXstreet.com (Barcelona) - Sebastien Galy, Senior FX Strategist at Societe Generale has taken a structural look at the prospects for EUR/USD looking forward and believes that price can move to 1.20.

Starting with the US, he sees that the US economy is and should steadily outperform leading to an outperformance of US assets. UST yields will steepen attracting foreign investors. With regard to Fed QE questions, he looks forward to the change in regime and believes that the balance sheet will show signs of improvement. In terms of the Eurozone, he believes that the ECB will be dragged and forced into action but will stick ever more closely to its inflation mandate. He writes, “The good news is that this we are heading for Japanification so that lower inflation may open the way to some easing.” Further, he sees that OMT is unhelpful and by the time we get there, the house is already burning to the cinder blocks. Hence, the objective is more to scare the wits out of government and force them to save and avoid a deflationary debt spiral.

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