From the FXWW Chatroom – Barclay’s FX month-end rebalancing monitor notes that “over the past month, a decline in risk aversion & market volatility led to reversals in safe haven flows, notably driving a short-term USD retracement, weakness in the JPY & softness in Japan’s bond market. The underperformance of Japanese markets leaves the market overweight the JPY in terms of FX hedges, resulting in a weak buy JPY signal versus the USD. The escalation of trade protectionist risk weighed on CAD and AUD assets, while European and UK markets were modestly up, inducing the model to produce weak sell signals vs. the dollar for all other majors (EUR, GBP, CAD & AUD).
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