Too much of a consensus?
Societe Generale Research discusses the current market conditions and notes that the markets are, subconsciously or not, making a bet that:
"1) the US fiscal package will be watered-down by moderates who remain powerful thanks to the wafer-thinness of the Democrat hold over Congress; 2) the disinflationary power of massive global excess capacity will water down and eventually drown out the rise in prices and 3) the Fed won't blink and will keep policy ultra-accommodative, as promised, through 2023," SocGen notes.
"As long as that's all the market's expecting, no wonder there is no rates volatility, no wonder risk sentiment remains resilient in the expectations that growth will surge everywhere once vaccines are distributed widely enough, and no wonder the dollar is soft, as it was after the Asian crisis and as it was in the immediate aftermath of the financial crisis...It's not at all impossible that we get EUR/USD to 1.30 by mid- 2022 but that we then build the foundations of the dollar's next Fed-inspired rally," SocGen adds.
