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Month-end rebalancing points to strong USD-selling – Citi

  
  Analysis
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It’s almost June

It's almost June
Citi’s month-end rebalancing model flags a strong USD sell signal against EUR and GBP at this month-end
“Our Asset Rebalancing Model notes a rotation from equities into bonds at May month end. The signal is moderately strong coming in at -1.4/+1.3 historical standard deviations (hist. std. dev.) for equities and bonds respectively.
The FX impact notes selling of USD against EUR and GBP at month end,” Citi notes.
Typically, month-end FX re-balancing flows is felt most going into the 4pm London fix on the last trading day of the month.

Base-case still for Fed to stay on hold in December and through 2020 – Citi

  
  Analysis
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Citi on the Fed outlook

Citi discusses the Fed policy trajectory in light of yesterday’s FOMC minutes from the October meeting.

“Minutes from the October 30th FOMC released overnight are broadly consistent with Citi analysts expectations for disagreement regarding the need to cut, but agreement that on leaving policy rates on-hold. On USD supply to year end (the more interesting part of the Minutes), Fed officials continue to look for ways to make sure funding pressures in the overnight lending market don’t cause a problem again with a “standing repo” seen as the preferred option that would likely provide substantial assurance of control over the federal funds rate (and USD supply). However, Citi analysts do not expect a final decision until H1 2020. ,” Citi notes.

“The Citi analyst view remains for the Fed to stay on hold in December and through 2020 though muted inflation makes hikes in the next year very unlikely. Cuts are possible should domestic activity data indicate a slowdown,” Citi adds.

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