Barclays month-end rebalancing model indicates no strong USD directional bias vs most majors, with a weak USD buying signal vs the EUR
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- Barclays said unlike previous months, its rebalancing signal is mainly driven by large moves in US rates across most currency pairs in January, increasing demand to buy USD into month-end.
- Modest gains in US equities offset this due to their large market capitalisation, leaving a neutral USD buying signal across most pairs.
- The bank said that for most countries, the neutral signal reflects US equity outperformance offset by US bond underperformance, but Europe differs, showing a clear weak USD buying signal driven by significant US bond underperformance. Japan remains neutral, as an unexpected election lifted JGB yields and the Nikkei, limiting the impact of US bond performance.
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