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The euro is stable and the yen is gaining ground on the risk-off atmosphere. What’s next?

Here is their view, courtesy of eFXdata:

Bank of America Merrill Lynch Global Research argues that EUR/JPY offers a better expression for global risk view in the G3 pack.

“We examine this in the context of EUR/USD and USD/JPY,  showing that while the two pairs share roughly similar volatility-adjusted carry, their sensitivities to risk metrics have been quite different. Most plainly, while USDJPY has been positively correlated with its vol-adjusted carry, EURUSD has displayed a negative correlation,” BofAML notes.  

“The bottom line is that carry matters for the USD,  but more for some pairs than others  for a variety of fundamental reasons.  From a trading perspective,  we believe  this means EURJPY offers a better carry-neutral, low vol expression of views on how the global risk outlook evolves  particularly after the outcome of US-China trade negotiations,” BofAML adds.  

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