Back
30 Sep 2014
The three themes to dominate October markets - Societe Generale
FXStreet (London) - Kit Juckes, Global Head of Currency Strategy at Societe Generale believes that three distinct themes are set to dominate October, US Monetary Policy, China slowdown and pressure on the ECB.
Key Quotes
"Three themes are likely to dominate October: The turn in the US monetary policy cycle, that sees QE end and the Fed continue down the (slow) path to a first rate hike; the Chinese slowdown, which currently sees GDP growth running at around 7% in Q3; and the pressure on the ECB to ‘do more' though for now further action is unlikely."
"The key US employment and business sentiment indicators due between tomorrow and Friday (ADP, ISM, NFP) will set the tone. June is still the most likely month for the first Fed hike, and the 1% rise in 2-year Treasury yields in the months preceding the start of the 2004-2006 hiking cycle (from 1 ½ to 2 ½%) continues to act as a warning as to how far the market can adjust between now and June (even if the dollar couldn't hold on to gains thereafter."
"An FF-2-yr spread of 125bp may not be repeated but the current 2-year yield of 58bp is still low. The FX market has moved faster than the rates market but even so, another significant push higher in front-end rates will support the dollar through Q4."
Key Quotes
"Three themes are likely to dominate October: The turn in the US monetary policy cycle, that sees QE end and the Fed continue down the (slow) path to a first rate hike; the Chinese slowdown, which currently sees GDP growth running at around 7% in Q3; and the pressure on the ECB to ‘do more' though for now further action is unlikely."
"The key US employment and business sentiment indicators due between tomorrow and Friday (ADP, ISM, NFP) will set the tone. June is still the most likely month for the first Fed hike, and the 1% rise in 2-year Treasury yields in the months preceding the start of the 2004-2006 hiking cycle (from 1 ½ to 2 ½%) continues to act as a warning as to how far the market can adjust between now and June (even if the dollar couldn't hold on to gains thereafter."
"An FF-2-yr spread of 125bp may not be repeated but the current 2-year yield of 58bp is still low. The FX market has moved faster than the rates market but even so, another significant push higher in front-end rates will support the dollar through Q4."