BofA: markets over-reacted the global turmoil

07 September,, Vilnius – Concerning the current global market turmoil, Bank of America Merrill Lynch has expressed its view and shared the future outlook for financial markets amid global fears.

Global financial markets have once more been thrown into a vortex following the Chinese equities, begins BofA, and we are now seven years from the global financial crisis in 2008. Yet, the markets remain to be punctuated by periodic volatility surges and more significantly, fear.

The recovery and global market healing path, following the 2008, has not been a smooth stretch of tarmac which, explains why investors stay nervous over current developments. However, recent market actions only echo those of the prior October rather than other “tantrums” and in BofA’s view FX markets have over-reacted. The major FX pairs have been driven by positioning rather than panic, the major bank adds, and the relative stability of the Forex is the main difference between the prior broad-based market volatility spikes.


“We have recently discussed how the current dislocation of FX from its traditional anchors provides value. We have highlighted our preference to be short CHFJPY on valuation grounds while we also think EURUSD will continue to head lower into the end of the year,” Merrill Lynch projects.

The monetary policy divergence trade is therefore still active, however, the major bank is cognizant that the market remains erratic and a period of increased volatility is likely to persist. Consequently, “we recommended structures to capture a period of elevated volatility. EURUSD 1mth straddle structures look particularly attractive at present,” Bank of America Merrill Lynch finished.

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