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12 Feb 2013
Forex Flash: EU FinMins meet as Fra/Ger split may prevent common stand – Societe Generale
Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that EU Finance Ministers continue their meetings today, but comments from the ECB’s Jen Weidmann reinforced the sense that a Franco-German difference of opinion will prevent any kind of common stand on currency policy.
He notes that EUR/USD is back in a range, capped by the market’s growing conviction that the ECB would act if LTRO repayments put market rates under any further upward pressure. He sees that 2-year Euro swap rates rose from 25bp to 75bp between mid-Dec and late January but after Mario Draghi’s soothing comments last week, have stabilised around 0.6%.
He feels that the most supportive factor for the pair may be that the bounce in EUR/JPY comes from renewed Yen weakeness. He finishes by writing, “USD/JPY and EUR/JPY volumes have picked up a lot in recent weeks, explaining increased FX volumes overall, and where EUR/JPY used to a function of EUR/USD and USD/JPY, that is not the case anymore.”
He notes that EUR/USD is back in a range, capped by the market’s growing conviction that the ECB would act if LTRO repayments put market rates under any further upward pressure. He sees that 2-year Euro swap rates rose from 25bp to 75bp between mid-Dec and late January but after Mario Draghi’s soothing comments last week, have stabilised around 0.6%.
He feels that the most supportive factor for the pair may be that the bounce in EUR/JPY comes from renewed Yen weakeness. He finishes by writing, “USD/JPY and EUR/JPY volumes have picked up a lot in recent weeks, explaining increased FX volumes overall, and where EUR/JPY used to a function of EUR/USD and USD/JPY, that is not the case anymore.”