EUR/USD could retrace to 1.05 if bond differentials take the upper hand again – SocGen
|The resilience of EUR/USD was one of the main stories in G10 FX last week. Economists at Société Générale analyze the pair’s outlook.
It is too soon to conclude that EUR/USD has bottomed
No matter how strong US GDP prints on Thursday, it should not affect expectations for a Fed pause in November after we heard from Chair Powell last week. However, a number close to 5% could make investors more nervous about a hike in December.
The widening in 10y UST/Bund spreads and the resilience of EUR/USD was one of the main stories in G10 FX last week, but we believe it is too soon to conclude that the pair has bottomed.
The premium in options has continued to rise for EUR puts/USD calls, and it is entirely possible that large option structures contained the pair between 1.0550 and 1.06. A retracement to 1.05 could follow if bond differentials take the upper hand again and the 10-year bond spread stays above 200 bps following the US GDP release and the ECB meeting.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.