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Feb 09 - 12:55 PM

BofA: Overview of our Current Open Trades in G10 FX

By eFXdata  —  Feb 09 - 11:00 AM

BofA: Overview of Current Open Trades in G10 FX

Synopsis:

BofA outlines its current positioning in G10 foreign exchange markets, highlighting a variety of strategies aimed at capitalizing on specific central bank actions, currency valuations, and economic data trends. The trades reflect expectations for currency movements based on monetary policy shifts, economic slowdowns, and valuation adjustments.

Key Strategies:

  • Short CHF vs. EUR and GBP: BofA positions for Swiss Franc weakness, anticipating its decline from overvaluation as the Swiss National Bank (SNB) halts balance sheet contraction, resumes intervention, and voices concerns over the currency's strength.

  • Short SEK vs. USD and NOK: This trade is based on strong US economic data, the Norwegian Krone's undervaluation, and a comparatively dovish stance by Sweden's Riksbank against the Federal Reserve and Norway's Norges Bank.

  • Short EURJPY via Options: BofA utilizes options to bet against the Euro in relation to the Japanese Yen, motivated by potential Bank of Japan policy normalization and the prospect of additional European Central Bank rate cuts in the second half of the year due to weak economic indicators.

  • Long EURUSD in Spot: Anticipating a weakening US Dollar as the American economy decelerates and the Federal Reserve initiates rate cuts later in the year, BofA holds a long position in EURUSD as a longer-term trade.

  • Long EURGBP Short-Term Volatility: This trade is a year-ahead relative value volatility play, positioning for short-term volatility in the EURGBP pair.

Conclusion:

BofA's diverse G10 FX trading strategies are crafted to exploit expected shifts in central bank policies, currency valuations, and economic trends. The bank's positions range from short strategies against the CHF, SEK, and JPY, to long bets on the EUR against the USD and GBP, signaling a comprehensive approach to navigating the complex landscape of global foreign exchange markets.

Source:
BofA Global Research

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