Bank of America Merrill Lynch Research provides an update of the current trends and the outlook heading into 2019 in light of the G10 Q3 balance of payments dataset.
"The financial account continues to dominate overall BoP dynamics but we are picking up growing divergences in current account balances as global trade wars begin to have an impact on trade flows. As we have flagged in previous notes, the shift from central bank quantitative easing towards quantitative tightening is being felt via the portfolio flows channel as are idiosyncratic stories such as HIA in the US and Brexit," BofAML notes.
"Analysis supports SEK, EUR, GBP Upside. Our analysis supports the case for medium-term upside in SEK, GBP, EUR. All three have seen an improvement in their basic balance over the past year and all three currencies remain undervalued in TWI terms. USD and NZD have seen a deterioration in their basic balance position. The USD remains structurally vulnerable as cyclical support continues to wane," BofAML adds.