From the FXWW Chatroom – The final signal for August month end resumes trends from last week and points at broad selling of USD against all G10 currencies except EUR today. The signal is relatively weak in most cases except the one to sell USDJPY which comes in moderately strong at +0.96 historic std dev.
The dramatic swings in equity moves over the past few weeks have caused rebalancing needs to change significantly over the past week as noted in previous updates (link, link). The most recent relief in equity performance suggests that the MSCI world index ends the month with a relatively benign loss of –1.8%. US, UK and Japanese equities have struggled the most while fixed income markets, particularly in the UK and US have outperformed.
A nearly -5% loss in Japanese equities is likely to have left foreign investors over-hedged. This leads the buy JPY signal to be the strongest this month coming in at just below +1 historic std dev. Strong performance from Euro area bonds are likely to partially offset hedging needs of foreign investors against that of Euro area ones. The net impact, opposes this month’s trend, with a sell EURUSD signal, albeit it remains relatively weak at just -0.5 historic std. dev.
The main risk around month end comes from political headlines particularly around Brexit and trade tensions as well as US sentiment indicators and Italian economic data.