Short EUR against RUB and BRL – SocGen

Research Team at Societe Generale, suggests that the EUR is expected to fall to 1.06 over the next 6-12 months and has slightly more favourable carry characteristics compared to the USD.

Key Quotes

“We prefer to use the EUR as the funding currency for bullish positions in BRL and RUB. For the BRL, while fundamentals are mixed and risks abound, the worst news on the domestic front is probably in the rear view mirror. Political uncertainty has been reduced, though not eliminated, in the near term, while growth is expected to gradually improve and inflation to moderate further.

Although the future trajectory of the RUB remains closely intertwined with a still-uncertain commodity outlook, the very recent decoupling between oil and the dollar could be an omen for further upside (or resilience, at the very least) in the RUB. The ruble should draw on the decelerating capital outflow and its significant current account surplus, entailing a limited reliance on portfolio inflows compared to high-yielding peers.”