Synopsis:

Credit Agricole's month-end rebalancing model points to moderate USD selling, especially against the EUR, ahead of this month's FX fixing. A combined strategy recommends selling USD vs an equally-weighted G10 basket, despite some counter-signals from corporate flows.

Key Points:

• Rebalancing Model Bias:
  The month-end portfolio rebalancing model suggests broad-based USD selling, with the strongest signal against EUR, driven by equity and asset performance patterns.

• Corporate Flow Divergence:
  In contrast, the corporate flow model flags selling pressure in EUR and GBP, which could partly offset some of the rebalancing-driven demand for these currencies.

• Combined Strategy Approach:
  The bank recommends combining the two models, ultimately resulting in a short USD position vs an equally weighted G10 currency basket to capture the broader rebalancing trend.

Conclusion:

Heading into this month’s fix, Credit Agricole’s models support tactical USD selling, particularly against the EUR, despite corporate flow caution. The net strategy remains moderately USD bearish near-term.