By eFXdata — Aug 18 - 03:15 PM
Societe Generale Research discusses its current tactical bias on the USD and adopts a neutral bias in the the near-term.
"If it's hard to see recessions coming, it’s easier to spot economic dislocations (like the S&L crisis, the dotcom and tech bubbles bursting, the structured credit madness and real estate bubble leading up the to the financial crisis). In the aftermath of a pandemic, during a European land war and an energy crisis, we have no shortages of those! And if monetary policy works with a 12-18-month lag and central banks feel compelled to raise rates at every monthly/quarterly meeting, the chances they can fine-tune economic soft landing, aren’t very good. Maybe the UK should stop tightening now, because the effects of what they have already done will become clear in 2023. But with inflation in double digits, they simply won’t pause," SocGen notes.
"The UK’s an easy example, but the point’s a general one. China’s housing bubble has burst, global supply chains and energy supplies are chaotic, Europe faces a huge cost to secure energy supplies through the winter. The odd one out is the US: Being the world’s largest oil producer, with plentiful natural gas supplies helps, but as real wages fall, housing slows and the Fed tightens, there are still huge risks out there. Still, even if the dollar’s current level has a lot of good (relative) news priced into it, we don’t want to sell the dollar and we do want to go on buying it against the euro and sterling," SocGen adds.
Société Générale Research/Market Commentary