AUD/NZD: A Good Buy; EUR/USD: Hedge Into UK EU Referendum - SocGen

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Old 06-08-2016, 09:27 AM
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Default AUD/NZD: A Good Buy; EUR/USD: Hedge Into UK EU Referendum - SocGen

AUD/NZD: A Good Buy; EUR/USD: Hedge Into UK EU Referendum - SocGen
07 Jun 2016 09:40 EDT

kit Juckes, Global FIC Strategist
Societe Generale Cross Asset Strategy

The big overnight movers are the pound (regaining some of yesterday’s politically-inspired fall) and the Australian dollar, which has reacted positively to the RBA leaving rates on hold. The RBA cut rates in April and after stronger then expected growth data, isn’t in a big hurry to act again. The Statement was balanced however and the lack of inflation and the global and trade environment could see a further cut in due course. We’re not bailing out of our AUD shorts, though at these levels, AUD/NZD is a good buy.

We’ll get Chinese FX reserves data overnight and the RBNZ tomorrow evening. This morning also saw Swiss FX reserves, up to a new high at CHF 602.1bn, indicative of how hard they have to work to compensate for a lack of capital outflows.

None of this is a recipe for buying vol, though maybe, given the way markets are now priced, using buying EUR/USD puts as protection ahead of the UK EU referendum now makes sense.
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