SocGen likes the upside in the euro
Societe Generale FX Strategy Research argues that the ECB isn't going to hike rates soon, but how fast they move to reduce the pace of bond purchases probably does depend on how much the euro rallies.
"But the turn in the economy is pretty plain for us all to see. This week it has been the IFO survey and money supply data that show a continued acceleration in underlying loan growth. So of course the lifespan of extraordinarily easy policy settings (particularly asset purchases) is shortening.
The ECB can't normalise monetary policy without sacrificing the extreme cheapness of the currency, but maybe the ECB President thinks he can avoid a disorderly currency correction if he managers to guide market expectations," SocGen argues.
"From here, we still think we're a heading, erratically, towards EUR/USD 1.20 and above EUR/JPY 130," SocGen projects.
EUR/USD is trading at 1.1406 and EUR/JPY at 128.77. For bank trade ideas, check out eFX Plus.