The firm says the balance favouring the dollar comes from relative equity performance. The largest of which is most pronounced between European and US equities in the past few weeks. Thus, the rebalancing points towards EUR/USD supply – which is also a high conviction view from Deutsche from a flow perspective for this week.
At the balance, the model points to month-end flows being more USD positive. And that is also supported by the notion that US equities have underperformed for a while versus all the rest of the world indices tracked by Deutsche. That adds to a more bullish USD bias in the short-term amid a lack of news flow this week, according to the firm.
Among the standouts, Deutsche highlights selling in NZD/USD and AUD/USD as part of a seasonal trend on the day before month-end i.e. 27 February and month-end date itself i.e. 28 February.