EUR: ECB buying more peripheral debt - SocGen

The ECB is buying more Italian debt than the capital key suggests it should which maybe reflecting the absence of anything much else to focus on at the moment, according to Kit Juckes, Research Analyst at Societe Generale.

Key Quotes

“The ECB buying more peripheral debt could be a sign of German scarcity or a deliberate policy tweak, and the more the latter is blamed the more euro-negative it would be. But EUR/USD is back up a bit this morning, and once again is showing significant resilience.”

“Real 10-year yields are now 25bpo below their July highs and the spread with the US continues to edge lower. The market’s long euros, short dollars and yen and yet the correction is very shallow. And with the 9-day RSI edging down to 64, it won’t take much longer for the momentum indicators to support the idea of buying a dip pretty close to here. It’s either a recipe for the dip-buyer to be frustrated, or for the bulls to get even more complacent. I’ll park myself in the latter category and we’ll stick with the view that we’ll see the other side of 1.20 this summer and remain hopeful that translates into further EUR/JPY upside.”