Month-End Flows Point to Yen and Pound Selling Against Euro

BofA's latest rebalancing model suggests that international portfolios may be selling the yen and pound against the euro at month-end.

According to BofA, its quantitative signals and expected rebalancing flows are bearish for both the JPY and GBP. This means that these currencies may face added near-term selling pressure.

The model estimates these flows by using a conventional 60/40 global equity and bond portfolio. The idea is that relative moves across asset markets during the month can leave international portfolios needing to rebalance their currency exposure when we get to month-end.

However, BofA notes that its signals for the euro are mixed, with expected rebalancing flows running against its other short-term signals. This may suggest that the currency may consolidate around current levels instead of experiencing significant price action.