By eFXdata — Jul 20 - 09:30 AM
Societe Generale Research discusses the current market condition amid the ongoing risk-off theme.
"There’s nothing like a Treasury market short-squeeze to send shivers down markets' spines. A sign the cycle has rolled over? A sign the Fed won’t be able to hike rates more than once or twice, now that we know the recession only lasted a couple of months and so this is best described as an old and frail cycle that was only kept alive with massive fiscal support? Or is this just a summer storm, an interlude between days of heat and humidity that will clear the air (even if it does drench us all)?," SocGen notes.
"The fall in the relative yield levels is striking. USD/JPY has only reacted very modestly – reasonable if it’s a correction clear-out, less so if it’s a change to the balance of risks. Even more than USD/JPY, EUR/JPY is a sell here if the current volatility, Covid concerns and search for safe havens persists," SocGen adds.
Société Générale Research/Market Commentary