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SocGen: Lethargy Is Creeping Into FX Markets



We – as well as Citi – previously commented on the broader market complacency in the market wrap. Now it’s the turn of SocGen’s FX strategist Kit Juckes to make some observations about emerging concerns of “lethargy” both in positioning and moves within the FX space.

From Juckes

Stretched moves threaten lethargy


Last week’s CFTC positioning data suggest that speculators are long the euro and long 10year Treasuries. The CFTC data only tell us about a part of either the FX or rates market, and I’m particularly wary of jumping to conclusions about 10year Notes as the wander around in their current range, but even so, the jist of the story is consistent: The inability of 10year US yields to get back above 2.40% and the willingness of speculators to go long even as yields fall back below their 2017 average, is what keeps the 10year Treasury/Bund spread at multi-month lows and EUR/USD bid.


The question, this week as it has been for a while, is whether a market with what seem stretched positions in both bonds and FX, can really take EUR/USD on upwards without some kind of correction? The main focus will be on Thursday’s ECB meeting and everyone (as far as I can tell) expects the focus to be on the lack of inflation rather than the case for further tapering of the ECB’s bond purchases. There’s clearly some reluctance to rock the boat (both in bond and currency markets) at the start of the summer break. That leaves us with EUR/USD 1.1620 as the next technical target, while on the downside 1.13 is the key support. Recent experience suggests we won’t get to the support line and will just mess about in this range before pushing higher again.



There’s little for the US market to focus on. Empire manufacturing today, TIC data tomorrow, housing starts on Wednesday and Philly Fed Thursday. Positioning ought to put a floor under yields around these levels but I struggle to see how we can generate the conditions for a sharp enough rise to threaten broader risk sentiment. USD/JPY may benefit, and if it does, so might EUR/JPY and AUD/JPY. The BOJ is expected to downgrade expectations on inflation revise upwards its growth outlook on Friday.


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PHNOM PENH (Reuters) – Cambodian Prime Minister Hun Sen encouraged the United States and European Union on Friday to freeze the assets of Cambodian leaders abroad in response to his government’s crackdown on the opposition and civil society.

Hun Sen, the strongman who has ruled Cambodia for more than three decades, has taken a strident anti-Western line ahead of a 2018 election and has dismissed donor criticism of the dissolution of the main opposition party.

The United States and European Union have suspended funding for next year’s election and Washington has put visa curbs on some Cambodian leaders. There is no current proposal for asset freezes by either the United States or European Union, but some lawmakers have floated the idea.

“I encourage the European Union and United States to freeze the wealth of Cambodian leaders abroad,” Hun Sen told a group of athletes in Phnom Penh, the capital.

Hun Sen said he has no money abroad and any actions by the EU and the U.S. would not hurt him.

The U.S. embassy made no comment. EU Ambassador George Edgar said on Friday there had been no decision on further measures by the bloc.

The Supreme Court dissolved the opposition Cambodia National Rescue Party (CNRP) last month at the request of the government, on the grounds it was plotting to seize power.

Hun Sen accused Kem Sokha, the leader of the CNRP of a U.S.-backed anti-government plot. The opposition leader and the United States denied that.

China, Cambodia’s largest aid donor, has leant its support to Hun Sen, saying it respects Cambodia’s right to defend its national security.

Reporting by Prak Chan; Editing by Clarence FernandezThul


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World News

Beijing evictions leave migrant workers in limbo as winter deepens



BEIJING (Reuters) – Winter is bringing a frigid existence and an uncertain future for migrant workers in Beijing deprived of electricity and heating as they resist a month-long campaign to evict them from the city’s urban villages.

A deadly fire in a hamlet of ramshackle dwellings on the capital’s southern fringes last month prompted a fire safety blitz by the authorities, forcing thousands of the workers out of homes and businesses.

But not everyone has left, and a handful of holdouts are preparing for tough times as temperatures plunge below freezing.

“There’s no electricity when we’re coming home. We can’t see where we’re going,” said Feng, a migrant worker hailing from the southwestern province of Sichuan, pointing to a pile of blankets.

Feng, who was willing to reveal only his surname, had been renting a room in a shared apartment block built and run by migrants in Picun, a village in northeast Beijing, until the authorities cut off their power and ordered everyone to leave.

“I sold my house in the northeast, there is nothing to go back to,” said another worker, Wang Liping, who said she paid 200,000 yuan ($30,000) to buy part of the apartment block where migrants like Feng rent rooms for a few hundred yuan each month.

“I’d rather freeze to death than leave here,” added Wang, who is refusing to leave despite efforts to remove her.

The evictions have sparked unusually direct criticism from China’s intellectuals, students and journalists, who say the government is unfairly targeting the vulnerable underclass.

“Originally it was just a fire, but they used the fire as an excuse to force people young and old onto the streets in the middle of the coldest days of winter,” independent political commentator Zhang Lifan told Reuters.

But the city could not do without migrants, Cai Qi, the city’s Communist Party chief and a close ally of President Xi Jinping, said during a visit to the migrants this week, in a bid to allay the fears.

The capital’s need for cheap labor has attracted thousands of workers, even though they are denied official residency permits because of government curbs on internal migration.

Migrant enclaves have grown into full-fledged communities today, from clusters of shanty towns. Picun, one of the most developed, has its own literature society and houses numerous aspiring artists and musicians.

One young couple living by torchlight in their block said they were considering going to Tangshan, a steel-producing hub in their home province of Hebei, but after 10 years of living in Beijing, they would miss the lifestyle.

“To be honest, if it wasn’t for all the migrants, Beijing wouldn’t be any better than any other city,” the woman, who is surnamed Xiang, told Reuters.

Additional reporting by Martin Pollard and Joyce Zhou; Editing by Clarence Fernandez


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