A note from SG via eFX (For bank trade ideas, check out eFX Plus)
- ECB Chief Economist Phillip Lane said that 'the currency 'feeds into our global and European forecasts and that in turn does feed into our monetary policy settings'.The timing is good - intervention, verbal or otherwise, works best when the market is over-positioned, which is definitely the case today. But, the implicit threat is empty. Partly, because the EUR/USD is merely back to its average level since 1999, so it's only over-stretched, in the short term. And because the ECB may not be able to ease in a way that weakens the euro.
- In the meantime, maybe an over-stretched market, and perhaps a rethink on relative growth prospects or even a rethink on the odds of President Trump being re-elected, will trigger a decent EUR/USD correction (to 1.17?) But will be a buyer if it does, looking for a move into a 1.25-1.35 range on a 2-3-year horizon
