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18 Feb 2013
Forex Flash: War without casualties please - Societe Generale
Reflecting on last week's G20 developments, Kit Juckes of Societe Generale notes that the G20´s leaders approve of policies to boost growth, while disapproving of policies to boost growth at the expenses of others. In summary he writes, “They'd like the kind of 'war' where no-one gets hurt. As the children say "whatever"!”
Juckes deduces that the message is that currency manipulation is bad, while zero rates and QE are good. And if those policies happen to cause a currency to weaken, well that's OK. He comments, “All too complicated for me, I'll stay short yen as well as CHF and GBP.”
Looking ahead, he notes that the European week´s highlights for the Euro will come from the German ZEW and IFO, European PMIs and pre-election excitement in Italy alongside the next LTRO repayment figures. He sees that the economic surveys should all be showing small improvement, but the Italian elections next weekend will support a level of anxiety. He feels that the European Yield curve can steepen (UK too), but the Euro is likely to meander, and maybe even possibly pull off a post result relief rally should Berlusconi fail to surprise with a win. For now, he can´t envisage anything dramatic happening.
Elsewhere, another monthly fall in UK unemployment is expected and will confound economists up and down the land as the divergence between GDP and employment is challenging to say the least. He finishes by writing, “The US will be enjoying a 3-day weekend today, which if nothing else, dampens down volatility. Wednesday's housing starts data are the next focus. The housing recovery continues steadily, one of several key differences between the US and Europe which will matter for policy in due course...”
Juckes deduces that the message is that currency manipulation is bad, while zero rates and QE are good. And if those policies happen to cause a currency to weaken, well that's OK. He comments, “All too complicated for me, I'll stay short yen as well as CHF and GBP.”
Looking ahead, he notes that the European week´s highlights for the Euro will come from the German ZEW and IFO, European PMIs and pre-election excitement in Italy alongside the next LTRO repayment figures. He sees that the economic surveys should all be showing small improvement, but the Italian elections next weekend will support a level of anxiety. He feels that the European Yield curve can steepen (UK too), but the Euro is likely to meander, and maybe even possibly pull off a post result relief rally should Berlusconi fail to surprise with a win. For now, he can´t envisage anything dramatic happening.
Elsewhere, another monthly fall in UK unemployment is expected and will confound economists up and down the land as the divergence between GDP and employment is challenging to say the least. He finishes by writing, “The US will be enjoying a 3-day weekend today, which if nothing else, dampens down volatility. Wednesday's housing starts data are the next focus. The housing recovery continues steadily, one of several key differences between the US and Europe which will matter for policy in due course...”