EUR/USD: USD/CNH In The Driving Seat; What’s Next? – SocGen

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What is the importance of USD/CNH rate to EUR/USD, as we head into year-end?

Here is their view, courtesy of eFXdata:

Societe Generale highlights the importance of USD/CNH rate to EUR/USD direction into year-end.

If the USD/CNH rate stalls around current levels, that won’t prevent further EUR/USD strength, but if this move is more than a shot across the market’s bows and is backed up with, say, intervention to drive USD/CNH back up, it would be a significant obstacle to EUR/USD moving above 1.20 for now. Given the uncertainty, it looks as EUR/USD is stuck in its range for a while longer,” SocGen notes.

“This does however highlight the greater control the PBoC has over its currency than is the case for most other major central banks, including the ECB. The PBoC, like the ECB, is fighting upward pressure on its currency that comes from the sharp fall in US real rates/yields. But the ECB has fewer tools with which to fight,” SocGen adds.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.