Back
17 Apr 2013
Forex Flash: Instability rises - Societe Generale
FXstreet.com (Barcelona) - Sebastien Galy, Senior FX Strategist at Societe Generale notes that it took only some speculation of a German downgrade to send the DAX plunging sharply lower, before it partially recovered.
He feels that the sensitivity of different markets to negative surprises seems to have risen sharply recently, particularly in Europe and the broad EM spectrum. In his eyes it suggests that the period of consolidation is continuing and until now, sharp corrections were met by sharp recoveries as they were in 2006 and 2007 typical of liquidity fuelled rallies. This is the second period of deep instability this year, the last one was end of February (“instability cubed”). He writes, “We are short and wrong in EUR/USD (or GBP/USD) but sticking firmly to the view with some fairly unappealing growth prospects in Europe and the QE theme mutating. EURUSD overshoot its 1.3080 80% quantile making it a natural attractor.”
He feels that the sensitivity of different markets to negative surprises seems to have risen sharply recently, particularly in Europe and the broad EM spectrum. In his eyes it suggests that the period of consolidation is continuing and until now, sharp corrections were met by sharp recoveries as they were in 2006 and 2007 typical of liquidity fuelled rallies. This is the second period of deep instability this year, the last one was end of February (“instability cubed”). He writes, “We are short and wrong in EUR/USD (or GBP/USD) but sticking firmly to the view with some fairly unappealing growth prospects in Europe and the QE theme mutating. EURUSD overshoot its 1.3080 80% quantile making it a natural attractor.”