Date: 31 Jul 2018

French bank Credit Agricole argued yesterday that “US equities have rallied this month supported by a recovery in market risk sentiment owing to some decent US corporate earnings, combined with firmer global growth data as well as a modest abatement in market fears around global trade tensions.” The French firm also noted that “G10 equity markets are also generally firmer across the board” while in the currency market “the USD performance has been a little mixed.” But what might this mean for the currency market with the last day of July having arrived? It is Credit Agricole’s view that “Overall, the marked US equity outperformance, when adjusted for market capitalisation and FX performance, suggests month-end portfolio-rebalancing flows are likely to show strong USD selling across the board.” Traders will have their own opinions on the value of such analysis but might at least wish to know that, of the currency pairs the French bank focuses on, Credit Agricole’s calculations indicate that equity portfolio month-end rebalancing suggests the strongest impetus for USD selling on July 31 should be against the Australian dollar, (AUDUSD), the British pound (GBPUSD) and the Canadian dollar (USDCAD).

by Neal Kimberley, External Currency Analyst.