- Our preliminary update of month-end FX hedge rebalancing needs points to selling of USD and buying of all other G10 currencies. The signal to buy JPY is strongest.
- US assets have continued to perform strongly in December with lower interest rate expectations lifting both equities and bonds. The MSCI US Net Total Return equity index reached a new record high on 19 December. Although the FTSE Russell US Government Bond Index is still nearly 13% below the 2020 highs, it has recovered by another 3.06% this month, bringing the total gain since 19 October to +7.24%
- Foreign investors’ needs to sell USD to hedge gains in US equities dominate this month’s signal. Due to differences in market size, the signal is a USD sell even against AUD and SEK where local equities have performed even more strongly.
- The signal to buy JPY and sell USD is strongest, the only one to exceed two standard deviations. This is primarily due to Japanese investors’ needs to hedge gains in foreign bonds with little offsetting JPY selling needs from foreign investors due to weak performance of Japanese assets. On the other hand, strong performance of Euro Area bonds weakens to signal to buy EUR.
- The 4pm London time fix will be published as scheduled on Friday, 29 December. For service alterations over the holiday period please see the relevant pages from Refinitiv and Bloomberg.