By eFXdata — Oct 01 - 10:45 AM
Societe Generale Research flags a scope for EUR/USD and GBP/JPY to break lower during this month.
"The EU is sending the UK a formal infringement notice after the internal market bill went to the House of Lords. Both sides want a de minimus trade deal agreed before the UK leaves the EU at the end of the year, but the loss of trust that the UK government has triggered is a huge obstacle. The MPC is clearly split on the merits of negative interest rates (in my opinion, there are none, at all) but even so, sterling is more likely to be weaker than stronger in a month’s time. GBP/JPY has had 6 days of gains but if it closes below 135 today, we fancy we’ll break below 130 by month’s end," SocGen notes.
"Recovery Fund concerns can hold the euro down, and the prospect of easier fiscal policy in the US doesn’t suggest that we’ll see any further narrowing in Bund/Treasury yields, now or for the foreseeable future. With a bullish consensus, it’s disturbingly easy to name a series of reasons for the euro to be weaker. On a positive note, even in Spain the second wave of the pandemic continues to be much less economically damaging than the first. But still, if we break outside a EUR/USD 1.16-1.19 range in October, suspect it will be to test 1.15," SocGen adds.
Société Générale Research/Market Commentary