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MNI: On Wednesday BofAML wrote that "the Fed will very likely cut rates on 31
July or 18 September. The market is fully priced for this. We think that history
can provide useful context for how to position this summer into the impending
easing cycle. Accordingly, we use (1) a market price-based approach using
signals recently generated by the US front-end; and (2) a timing-based approach,
whereby Fed cuts are assumed to occur at a defined point in the future (July or
September meetings) as the basis for identifying top performers. Results
intuitively suggest a portfolio of short USD and long US fixed income. Within
G10 FX, we find unexpected heterogeneity, suggesting the importance of pair
selection. Historically, EUR/USD tends to rise strongly with favorable
probability over approximately the next 2-3 months, irrespective of approach. We
therefore think it could be the best way to express a bearish USD view. The
outlook for high-beta FX pairs - which track equities and volatility - seems
sensitive to Fed cut proximity. A later September cut would argue against these
risky expressions short-term."