Month End flow Models for May 2018
Bond and equity performances call for USD rebalancing sales in currency neutral investor portfolios. US assets have been outperforming their peers this month and
no wonder the highest signal is vs EUR. So watch out for the runup to the 4pm London fixings tomorrow and Thursday in all this mess we’re living. There could be some really nasty swings. The main signals are in EUR, CHF, JPY and scandies in that order, but all currencies could see some action. The lesser divergences have been noted in CAD, NZD as their assets have been relatively at par with US’ .
BUT one big warning, the models are up to date to yesterday, today’s moves are not in there but I wouldn’t expect to much change as EUR assets being dumped, the strength of the signal should remain if not increased.
As per previous month’s posts in relation to month end flows: They rarely change the underlying direction of the market but can create serious wobbles in some pairs or disrupt some positions at the time they hit the market out of experience. They can in turn offer good take profit or counter trade opportunities, which is the way I tend to use them rather than suing them as a trading strategy. The past months the models have been pretty much calling it right on the fixings but they are in no way a guarantee of course, especially in these days of uncertainty. So be careful and just know they will be around, so not to be taken off guard if an unexplained move by any news would occur around that time.
Stay safe and happy hunting