Societe Generale Cross Asset Strategy Research argues that as EUR/USD threatens the 1.20 'upside overshoot' target this summer; there’s every reason to be cautious about the short-term outlook.
"Neither capital flows or trends in relative bond yields justify the rally going on without a longer pause, or even a deeper correction than we’ve seen.
The June current and capital account data for the Euro area show a current account surplus that’s stabilising, which is good, outflows in the bond market which have fallen back but still dwarf the current account surplus and a net equity outflow too. The bond flow data and the trend in the overall current account balance do help relieve downward pressure on the euro somewhat, but it’s a real stretch to find anything here to explain why it’s gone up as fast as it has," SocGen argues.
Source: Societe Generale Cross Asset ResearchOriginal Article
