Societe Generale Cross Asset Strategy Research is out with its top FX trades for 2018 which includes 3 trades in spot (Long EUR/USD, Long AUD/NZD, and short USD/CAD). The 3 trades are structural-based that are meant to express SocGen’s thematic views through the next 6 to 12 months.
Long EUR/USD: “After a hiatus of a few months, we expect the euro’s rehabilitation to resume, albeit unevenly, in 2018. It’s cheap, and while it needs higher Bund yields to propel it higher, a 35bp starting point gives yields room to rise,” SocGen argues.
Long AUD/NZD: “AUD/NZD has been stuck in a 1.00-1.15 range for four years now, but as the commodity cycle bottoms, we think there will eventually be a break higher. The RBA is closer to tightening policy than the RBNZ, even if neither is very close,” SocGen adds.
Short USD/CAD: “We think fair value for USD/CAD is closer to 1.20 and expect a gradual move back towards that level as long as NAFTA survives and oil prices remain in their current range,” SocGen argues.