EUR/USD: Post-ECB: Towards 1.20 Before A Meaningful Correction – SocGen

Societe Generale Cross Asset Strategy Research highlights 2 key points from EUR price action in reaction to today’s July ECB meeting.

“Firstly, this is a meeting in late July, a time when market reactions should not be over-interpreted. Secondly, the FX market typically doesn’t react to shifts in expectations about policy moves in the very short term, and we heard nothing today to alter the view that the ECB is embarking on a gradual shift towards policy normalisation, which is inconsistent with an undervalued currency,” SocGen notes.

EUR/USD: What’s Next? 

“EUR/USD is still moving upwards in tandem with a gradual tightening in real and nominal yield spreads. The euro is rising faster than seems consistent with the move in yields, but that’s consistently been the case since March. At some point, this is going to result in a correction for the euro, but we suspect that EUR/USD will reach 1.20 first,” SocGen argues.

Source: Societe Generale Cross Asset Research

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