1 Jul 2013
Flash: EM Liquidations cause reversal today – Societe Generale
FXstreet.com (London) - Sebastien Galy at Soceiete Generale notes how the size of the liquidation in EM vs USD positions ahead of quarter end has been leading to a reversal today.
This has been dragging the USD lower across the board until momentum tapers ahead of NFP. He said that fluctuations in this mechanism should continue to dominate the market into the summer and the last of the quarter end liquidation should be seen today in the UST market as investors adjust their duration positioning, presumably lower ahead of NFP and tapering. The reversal in EM and bearish trade is accelerated, he says, by a widespread bounce in European PMI including crucially Spain (and Japan tankan). He feels that short CHF and JPY are likely to gain at the expense of USD giving many an opportunity to reload on long USD later in the week and EURCHF should drift higher
This has been dragging the USD lower across the board until momentum tapers ahead of NFP. He said that fluctuations in this mechanism should continue to dominate the market into the summer and the last of the quarter end liquidation should be seen today in the UST market as investors adjust their duration positioning, presumably lower ahead of NFP and tapering. The reversal in EM and bearish trade is accelerated, he says, by a widespread bounce in European PMI including crucially Spain (and Japan tankan). He feels that short CHF and JPY are likely to gain at the expense of USD giving many an opportunity to reload on long USD later in the week and EURCHF should drift higher