Citi's Month-end Model Points to Net USD Selling

Citi's FX month-end rebalancing model points to:

• Net USD selling need into the Friday close. The signal is broadly in line with historical norms at around one standard deviation in all pairs except JPY.
• February's net USD sell signal is made up of USD selling needs by international equity investors worth -0.15% of global index-following AUM and USD buying needs by bond investors worth 0.04% AUM.
• Prelim signals are strongest in GBPUSD where it measures +1.3 standard deviations. This is because UK fixed income has strongly under-performed, suggesting that foreign bond investors will also likely be GBP buyers to reduce their hedges.
• For the JPY, flows are roughly balanced because strong performance of Japanese equities will likely also lead to JPY selling by foreign investors. Given the relatively stronger signals for EUR and GBP buying, Citi say markets may also expect some EURJPY and GBPJPY upside.