TD Research makes the case for the EUR funded carry in 2021.
"The primary sequence looks like this: USD rallies on positioning, growth, and the rates pivot, then it weakens against selective EMs and G10 commodity currencies on the global growth recalibration in the months ahead. The EUR thus becomes the funder of choice, again breaking its correlation with EMFX," TD notes.
"The first chart bears EUR/EMFX correlations over time, underscoring some deviations from the norm. The EUR's biggest downcycle (mid-2015) over its history dovetails with a collapse of correlations. ..We think this setup is likely to play out again soon, underscoring our "medium-term" call to fade the peak in cross-currency correlations," TD adds.