Chief Analyst at Danske Bank Arne Rasmussen sees both central banks under pressure in light of current developments in JPY and EUR. Key Quotes “Funding currencies for not least the EUR and the JPY have significantly appreciated over recent months despite both the ECB and Bank of Japan signalling more easing”. “The reason for this is found in the EUR’s and the JPY’s status as preferred funding currencies, which especially in 2014 contributed in sending the two currencies to far weaker levels than what long-term models would point to as ‘fair’. “When markets tumble, a reversal in EUR and JPY funded transactions, hedge-ratio adjustments and general stop-loss triggering result in appreciation pressures”. “The ECB and BoJ are therefore ‘fighting gravity’, which is also reflected in the recent IMM data: JPY positioning is close to the highest level since October 2012 while EUR bets are at the least bullish level since June 2014. Short term, we would be careful going against this trend”. For more information, read our latest forex news.