BofA's month-end flow model flags yen and pound selling, euro buying

Month-end is upon us once again.

BofA's latest rebalancing model offers initial signals on how month-end flows could influence trading conditions next week. It points to sales of yen and sterling against purchases of the euro for the September fix.

As a reminder, BofA calculates these flows based on a standard 60/40 global equity and bond portfolio. The concept is that monthly shifts in asset prices can cause international portfolios to adjust their currency positions at month-end.

This month, however, the forecast is not simply about the dollar.

For the euro, BofA notes that the anticipated rebalancing flows conflict with its other short-term indicators, implying that the currency might trade sideways near present levels.

Regarding sterling and the yen, BofA reports that its quantitative signals and the expected rebalancing flows are both bearish. This adds further selling pressure in the near term.

As is typical with month-end flows, these signals should not be viewed as a definitive trading direction. Such flows are famously hard to predict and become more relevant nearer the fix. They are best considered one factor among many, not the primary driver of price movements.

Additionally, note that the September month-end coincides with the close of the third quarter. This could introduce extra rebalancing activity. Therefore, these signals are worth monitoring as next week's fixing window approaches.