Synopsis:

Société Générale offers a guarded forecast for EUR/USD, USD/JPY, and AUD/USD, highlighting potential for limited movements and the influence of upcoming economic data and market sentiment.

Key Points:

• EUR/USD Outlook: SocGen predicts a potential drop for EUR/USD below 1.05, though falling short of parity. The forecast suggests a lackluster outlook, with the bank hoping for, but not necessarily expecting, market surprises that could influence the pair.

• USD/JPY Dynamics: Recent CFTC data indicates a growing short position on USD/JPY, suggesting that the market is increasingly bearish on the pair. However, SocGen notes that the upside for USD/JPY is limited, and a significant catalyst for reversing this trend appears unlikely in the immediate future.

• AUD/USD and Australian CPI Data: The focus for AUD/USD this week is on the Australian CPI data set to be released on Wednesday. SocGen expects the March CPI to rise slightly from 3.4% to 3.6%, with core inflation anticipated to decrease from 4.2% to 3.7% in Q1. The firm questions whether these figures will be sufficient to adjust the AUD rate curve upward, noting that the Reserve Bank of Australia (RBA) is currently in an extended pause on rate changes. A significant surprise in the data may be necessary to trigger a notable currency reaction.

• Broader Market Sentiment: SocGen also points out that overall risk sentiment will play a crucial role in dictating movements across these major currency pairs. The mood in the market was more positive this morning, but it remains to be seen if this optimism will persist.

Conclusion:

Société Générale’s analysis suggests a week of cautious watching for major currency pairs, with key data releases and broader market sentiment expected to be major drivers. The firm underscores the need for unexpected data outcomes to significantly impact currency valuations, especially for the AUD following upcoming CPI releases.