Back
1 Jul 2015
G10 FX Model: Maintaining a long USD bias – Westpac
FXStreet (Barcelona) - Richard Franulovich of Westpac, offers their FX portfolio outlook build using their proprietary G10 FX model.
Key Quotes
“The G10 FX model adopts a risk averse posture for the week ahead, dumping EUR, adding to dollar bloc shorts, opening a JPY long and diving back into an aggressive overweight USD long.”
“The model portfolio raises its USD long from 34% to 47% for the week ahead, higher US yields into the back-end of last week the major catalyst via our total yield signal. The bulk of the USD long bias however – easily accounting for more than half of overall long USD exposure - is a function of our bullish US data surprise index signal, which has one more week to run.”
“Our logit probability signal – one of our key short term macro signals – also turns more constructive on the USD, mainly as the uptrend in crude oil prices shows increasing signs of stalling out.”
“The model finally jettisons its EUR long, thus ending a largely futile 16 consecutive weeks that the model has held a long EUR position. The outperformance in bunds in recent days, via our total yield signal is the main catalyst for the model’s decision to exit its EUR long.”
“The model rebuilds its JPY long, taking it to a modest 8.3% for the week ahead and largely completing the portfolio’s distinct tilt towards risk aversion for the week ahead.”
Key Quotes
“The G10 FX model adopts a risk averse posture for the week ahead, dumping EUR, adding to dollar bloc shorts, opening a JPY long and diving back into an aggressive overweight USD long.”
“The model portfolio raises its USD long from 34% to 47% for the week ahead, higher US yields into the back-end of last week the major catalyst via our total yield signal. The bulk of the USD long bias however – easily accounting for more than half of overall long USD exposure - is a function of our bullish US data surprise index signal, which has one more week to run.”
“Our logit probability signal – one of our key short term macro signals – also turns more constructive on the USD, mainly as the uptrend in crude oil prices shows increasing signs of stalling out.”
“The model finally jettisons its EUR long, thus ending a largely futile 16 consecutive weeks that the model has held a long EUR position. The outperformance in bunds in recent days, via our total yield signal is the main catalyst for the model’s decision to exit its EUR long.”
“The model rebuilds its JPY long, taking it to a modest 8.3% for the week ahead and largely completing the portfolio’s distinct tilt towards risk aversion for the week ahead.”