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SocGen Favour Short EUR/AUD Via Spot & Options on Hawkish RBA

AUD
  • SocGen write that the RBA’s hawkish bias is at odds with other central banks, sees value in EUR/AUD downside via options
  • SocGen recommend short EUR/AUD spot at 1.65, targeting 1.55, with a stop of 1.68.
  • They also see value in buying EUR/USD 3m 1.60/1.58 put spreads
  • They write that as low FX vol tends to sustain a pro-carry environment, a higher repricing in AUD rates would benefit the currency, and as such AUD is most likely to perform well against EUR.
  • Resultingly, they see short EUR/AUD spot with a tight stop-loss to take advantage of rate differentials, but note that investors can also take advantage of low implied vol to trade a move below 1.60 via tight puts spreads with low-delta strikes.
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