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Société Générale see EUR/USD to as low as 0.95 next quarter

  
Analysis, Forex

An ICYMI EUR/USD view from SG:

  • As oil prices rose in the run-up to the GFC, both European and US terms of trade suffered, but this time around, the relative effect is completely different. From a US perspective, this highlights the positive impact on the dollar of rising energy prices; for the euro, it just highlights the scale of the challenge confronting the continent.
  • I can’t see a significant rebound for any European currency until we get through the gas crisis.
  • Our current forecasts look for EUR/USD to trough in Q3, in a 0.95-1.00 range, and while that level may be about right, it’s harder now, to see a bounce before the end of the year.
eurusd chart 25 August 2022 22

Morgan Stanley with 3 signs equities are in a bear market rally

  
  Analysis
  • As enticing as this rally has been … it is still no more than a bear-market rally. We caution investors about getting drawn into harm’s way,” said Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management. “Inflation is far from tamed, earnings estimates need to be adjusted and stock market enthusiasm just isn’t supported by other market dynamics.”

and

  • “We expect a continued fade in growth momentum, implying equity market downside. While a number of recent macro data points have been favourable, we believe this does not change the underlying narrative,” said Sebastian Raedler, head of European equity strategy at BofA.bears

Chinese onshore yuan sees weakest daily close against the dollar in two years USD/CNY closes the domestic session at 6.6854, its highest since 27 August 2020

  
Analysis, Forex

It isn’t very much talked about in the context of broader markets this week but the latest weakening in the Chinese yuan is arguably one of the more significant developments in FX at the moment. The PBOC already teed up the move at the end of last week and whatever the case may be, it is a notable tailwind for the dollar to move higher.

Nord Stream 1 won’t be shutting down for 3-day maintenance after all (update: not so fast)

  
  Analysis

TTF European benchmark natural gas prices are down after a Nord Stream announced it won’t be conducting a three-day maintenance shutdown at month end. The shutdown was announced on the weekend and led to yesterday’s spike in TTF prices and decline in the euro to the worst since 2002.

Nord Stream now says it won’t be carrying out the maintenance at the Portovaya offshore compressor station because it lies outside of the responsibility zone of Nord Stream.

That sounds like quite the SNAFU and also like Gazprom (and Russia) were playing games, but that’s nothing new.

TTF gas prices daily

Update: On a second read of this, some traders are informing me that what Nord Stream is saying is that it won’t be the one doing the maintenance but the work will still go ahead. Though it’s not clear who will be doing it (Gazprom?) or necessarily when. The whole thing adds a new complication.

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