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4 Jun 2013
Flash: Sell Euro - Societe Generale
FXstreet.com (Barcelona) - Societe Generale Strategist Alvin T. Tan recommends that investors sell euro as ECB reacts to weakening growth and inflation, with more to come.
He begins by noting that the euro moreover remains elevated relative to high frequency Euro area growth indicators, and should fall accordingly. Finally, the euro is becoming entrenched as a global funding currency.With an eye to the risks he adds that unexpected growth upturn in the Euro area, driving ECB to tighten monetary policy.
In terms of how to structure the trade he writes, “Short EUR versus equal-weighted long basket of USD, NOK and AUD. We spread out the long-side of the trade to prevent it being dominated by the idiosyncratic country risks of each of the long currencies. The three long currencies also have markedly different relationships to broader global risk sentiment. The diversified basket trade is positive carry.”
He begins by noting that the euro moreover remains elevated relative to high frequency Euro area growth indicators, and should fall accordingly. Finally, the euro is becoming entrenched as a global funding currency.With an eye to the risks he adds that unexpected growth upturn in the Euro area, driving ECB to tighten monetary policy.
In terms of how to structure the trade he writes, “Short EUR versus equal-weighted long basket of USD, NOK and AUD. We spread out the long-side of the trade to prevent it being dominated by the idiosyncratic country risks of each of the long currencies. The three long currencies also have markedly different relationships to broader global risk sentiment. The diversified basket trade is positive carry.”