Societé Generale - "(...) now UK economic surprises are at almost their most negative level ever suggesting we are closer to a turning point. Surely Carney will do what must be done to ease so that event is yet to happen. The question is how far we could run to the topside in EURGBP before it peaks. From a valuation point of view, we are unsurprisingly getting to extremes as is typical in a regime break. The models then tend to follow and lag spot. More importantly, we moved to the more extreme range based on long-term valuations. The odds are therefore that selling topside in EURGBP vs maintaining downside positions in EURUSD may prove an interesting trade.
US retail sales will be the litmus test in the US and should improve somewhat in line with the US business cycle. It should support USD/JPY which will then be met by investors offloading some of their longs. A phase of consolidation generally means that downside in USD/JPY will tend to be a bit more bid, no surprise. EUR/USD will likely continue its break higher, helped in part by rising yields in Italy. We continue to expect a bump in the road there.
This bump in the road is the reason why our short USD/CAD is entered at higher levels. As a client pointed out, it is smarter to be short EUR/CAD. No argument."