Euro on the move - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that the euro may only get a modest lift from a reduction in French political uncertainty, but that should be enough to lift EUR/JPY and strengthen euro-satellite currencies.

Key Quotes

“The combination of clouds clearing over Europe and a (slightly) hawkish Fed is neutral for EUR/USD in the near term, but any ECB hawkishness in the coming months would change that. This week, 10y yields are up 6bp in the US and 9bp in Germany, but JGB yields are still anchored and the yen will likely fall further unless the rise in yields is sharp enough to derail risk sentiment. After 3% (qoq saar) growth in 1Q US unit labour costs, average hourly earnings may be the key element of Friday’s labour market report. If they stay at 2.7% yoy, this is probably just a ‘carry wobble’. A slowly hiking Fed won’t scare investors away from carry trades. Sharply lower commodity prices could, if they come with fears of a significant slowdown in Chinese growth. We just can’t see either of those materialising just yet.”