Published: 2025-12-31T16:19:10.000Z
EUR/JPY, EUR/CAD flows: EUR up and 2026 Depends on Hedging
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The EUR has gained across the board this afternoon, helped by year end flows in thin markets.
The EUR performance in 2025 owes a lot to hedging of the huge equity portfolio of European funds including UK/Switzerland and Norway. TICS data suggests these total USD8trn, compared to USD1trn from Japan. European funds were underhedged and long U.S. equities when the April reciprocal tariff changed decisions on hedging USD exposure. While hedges are better, optimal hedges against the USD have risen, while the market expects the Fed to cut and ECB to stay on hold. This could be a key driver of the EUR v USD and against JPY in 2026.
