1 Dec 2014
Falling oil is still the main theme - SG
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Research at Societe Generale, notes that Oil prices are at their lowest levels since mid-2010, falling again in Asian markets, and it still continues to be main theme affecting the Forex market.
Key Quotes
“Oil prices are at their lowest levels since mid-2010, falling again in Asian markets. There are three groups of currencies which are affected -oil producers, other commodity producers, and countries where lower oil prices put sufficient downward pressure on inflation to prompt further policy easing. Nowhere do markets want to get excited about the reflationary effects of cheaper oil – perhaps that’s a story for 2015.”
“Amongst the oil producers, CAD and NOK remain the most vulnerable of the G10 currencies, with MXN and of course RUB outside G10. Long USD/CAD looks sensible as a break of 1.1470 triggers a move to 1.18 or so in pretty short order and there is no point even thinking about levels to buy NOK until we reach stability.“
“The yen and the Euro are both suffering to some degree from the feed through to lower inflation, even though both economies benefit from cheaper oil. In Japan, the focus is on the general election, although Mr Abe will surely get the rejuvenated mandate he wants.”
“USD/JPY continues to suffer only minuscule corrections fresh Nikkei buying and fresh yen selling to start December may point to a move through 120 this week.”
“EUR/USD will be on tenterhooks ahead of the ECB meeting on Thursday (though Q1 2015 is more likely for sovereign QE). It’s hard to see what sovereign QE will do for growth however, except through the indirect effect on the currency. That however, just reinforces a view that a weaker Euro is now the ECB’s main (unofficial) policy tool. We’ll get more weakness.”
Key Quotes
“Oil prices are at their lowest levels since mid-2010, falling again in Asian markets. There are three groups of currencies which are affected -oil producers, other commodity producers, and countries where lower oil prices put sufficient downward pressure on inflation to prompt further policy easing. Nowhere do markets want to get excited about the reflationary effects of cheaper oil – perhaps that’s a story for 2015.”
“Amongst the oil producers, CAD and NOK remain the most vulnerable of the G10 currencies, with MXN and of course RUB outside G10. Long USD/CAD looks sensible as a break of 1.1470 triggers a move to 1.18 or so in pretty short order and there is no point even thinking about levels to buy NOK until we reach stability.“
“The yen and the Euro are both suffering to some degree from the feed through to lower inflation, even though both economies benefit from cheaper oil. In Japan, the focus is on the general election, although Mr Abe will surely get the rejuvenated mandate he wants.”
“USD/JPY continues to suffer only minuscule corrections fresh Nikkei buying and fresh yen selling to start December may point to a move through 120 this week.”
“EUR/USD will be on tenterhooks ahead of the ECB meeting on Thursday (though Q1 2015 is more likely for sovereign QE). It’s hard to see what sovereign QE will do for growth however, except through the indirect effect on the currency. That however, just reinforces a view that a weaker Euro is now the ECB’s main (unofficial) policy tool. We’ll get more weakness.”