mercredi 31 décembre 2014
EZ Deflation Risk + Higher Political Risk = Stay Short EUR - BNPP
Posted on 23:37 by nice news
This week's Spanish CPI data provided the first glimpse of eurozone inflation in December in response to the recent sharp decline in the price of oil, notes BNP Paribas.
"The pace of deflation in Spain increased by faster than expected, with prices down 1.1% y/y in December, below market expectations for a decline to -0.7% from -0.5%," BNPP clarifies.
"Our economists expect the EZ flash CPI estimate on 7 January to show a negative inflation print of -0.1% y/y. Spain’s inflation number for December surprised to the downside at -1.1% this week, while Germany will release its data for December on 5 January," BNPP projects.
Sources of EUR pressure:
"Increasing deflation pressures should support expectations for the ECB to announce QE on 22 January and outweigh concerns of ‘moral hazard’ ahead of the Greek general election," BNPP argues.
"In addition to rising deflation risks, political risk in the eurozone is on the rise with Syriza (the anti-establishment party) ahead of New Democracy in the Greek polls," BNPP adds.
Staying short EUR/USD:
"We continue to favour selling the EUR vs the USD, targeting 1.18," BNPP advises.
In line with this view, BNPP maintains a short EUR/USD position in its portfolio going into 2015. The trade entered at 1.2520 with a stop at 1.28 and a target at 1.18.
"The pace of deflation in Spain increased by faster than expected, with prices down 1.1% y/y in December, below market expectations for a decline to -0.7% from -0.5%," BNPP clarifies.
"Our economists expect the EZ flash CPI estimate on 7 January to show a negative inflation print of -0.1% y/y. Spain’s inflation number for December surprised to the downside at -1.1% this week, while Germany will release its data for December on 5 January," BNPP projects.
Sources of EUR pressure:
"Increasing deflation pressures should support expectations for the ECB to announce QE on 22 January and outweigh concerns of ‘moral hazard’ ahead of the Greek general election," BNPP argues.
"In addition to rising deflation risks, political risk in the eurozone is on the rise with Syriza (the anti-establishment party) ahead of New Democracy in the Greek polls," BNPP adds.
Staying short EUR/USD:
"We continue to favour selling the EUR vs the USD, targeting 1.18," BNPP advises.
In line with this view, BNPP maintains a short EUR/USD position in its portfolio going into 2015. The trade entered at 1.2520 with a stop at 1.28 and a target at 1.18.
EZ Deflation Risk + Higher Political Risk = Stay Short EUR - BNPP
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