EUR/JPY: Correction An Opportunity To Buy – SocGen

Societe Generale FX Strategy Research notes that following the US May jobs report, the Fed is likely observing the decent gains in employment, and the modest wage growth, which support a June rate hike, but don’t point them in the direction of any longer-term sense of urgency.

“The desire to get inflation back to its 2% target (for the PCE deflator) outweighs any sense that they need to get rates to the FOMC’s projected long-term ‘dot’ at 3%.  

A slow-moving fed is not a recipe for a stronger dollar, but it’s not particularly a convincing recipe for much lower US bond yields or for a risk-averse, stronger yen either. It looks more like a recipe for yield-hunting to return,” SocGen adds. 

On that basis, the correction in EUR/JPY over the last few days is an opportunity to buy as USD/JPY finds support at its 200-day moving average,” SocGen argues.

Source: Societe Generale Cross Asset Research

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