Bank of America Merrill Lynch on BoP trends
Bank of America Merrill Lynch FX Strategy Research has updated its Balance of Payments (BoP) analysis to gauge medium-term FX trends, arguing that such n exercise is important at this stage where markets move beyond political risks, and fundamentals are taking over as the key FX drivers.
"In the near term, FX dynamics are likely to be dominated by June monetary policy meetings, notably the Fed and the ECB....
But looking further ahead and against the backdrop of improving global growth prospects, the shift in emphasis away from monetary accommodation towards fiscal stimulus is also likely to be a theme. We therefore take this opportunity to update our balance of payments analysis." BofAML argues.
What are the m/t signals: Long GBP/CHF, CAD/CHF, AUD/CHF, NOK/CHF.
"Our analysis of the basic balance suggests, all things being equal, medium-term investors should be long GBP, CAD, AUD and NOK whilst being short CHF.
GBP/CHF chart:
