Credit Agricole CIB Research sees a scope for the return of G10 carry trade.
"We have long been arguing that the growing central bank policy divergence is the bedrock of FX carry trades. The higher-yielding NOK and the GBP (together with the NZD, CAD and AUD) have emerged as the best-performing G10 currencies, and the low-yielder JPY was the worst-performing currency in the wake of the policy meetings," CACIB notes.
"As demand for carry trades grows from here, this should support the high-yielding NOK and CAD and, to a lesser degree, the NZD and AUD as well as the USD. The growing rate advantage of the GBP will be supportive as well, but we believe that persistent downside risks to the UK growth outlook will make any BoE policy normalisation more cautious and thus less supportive for the currency. We continue to view the JPY and CHF as the best funding currencies in G10 and expect them to emerge as the biggest underperformers in the medium term," CACIB adds.