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We touch on three key themes this week, which we will further explore in forthcoming FIRMS reports. Theme 1: Low FX volatility Despite significant event risk, including ongoing China-US trade negotiations and Brexit, and central banks’ dovish shift in recent weeks, volatility in major currency pairs – with the exception of the Turkish Lira, Brazilian Real and Argentine Peso –
Read moreThere is no formal definition of what constitutes a safe haven currency. However, it will normally exhibit a number of related characteristics, including i) high trading volume and liquid financial markets, ii) reserve currency status, iii) a low yield and iv) low volatility. Importantly, a safe haven currency will tend to be inversely correlated to assets with a higher risk
Read moreThe House of Commons (HoC), the lower house of parliament, will on 12th March hold a legally-binding vote on whether to approve Prime Minister May’s draft Brexit deal – the Withdrawal Agreement and Political Declaration on the UK’s future EU relationship. We expect the outcome of this critical vote to be closer than on 15th January when an all-time high
Read moreIn line with our forecasts, the 60bp of central bank rate hikes in 2018 is contributing to the ongoing slowdown in global GDP growth, which we estimate will fall below 3% yoy in Q1 2019 for the first time since Q3 2016. The broad-based moderation in global economic growth, along with the fall in crude oil prices, has pushed global
Read moreThe ongoing trade war between the US and China undoubtedly contributed to the slowdown in Chinese GDP growth to a nine-year low of 6.4% yoy in Q4 and (re)ignited concerns that China is in trouble. However, this slowdown needs to be put in context. For starters, this gradual downturn in Chinese GDP growth is probably a reasonably accurate reflection of
Read moreIn the UK the House of Commons voted against the draft Brexit deal by a crushing majority of 230 – in line with our forecast (Tuesday 11th December: Brexit D-Day, 4 December 2018). With the UK due to exit the EU in only 70 days, the British government is fast running out of time and options and Sterling volatility is
Read moreThis report examines the monthly seasonal patterns of 32 major Nominal Effective Exchange Rates (NEERs) going back to January 2011, using 76,600 daily data points. The NEER provides a more accurate overall picture (than the exchange rate versus the Dollar or other individual currencies) of a country’s currency and trade competitiveness and risks of imported inflation/deflation and is therefore an
Read morePrice action in markets deprived of tier-one macro data over the Christmas and New Year period has centred on acute volatility in US and global equities, with sizeable intra-day swings including a temporary flash crash in the USD/JPY cross below 105 on 3rd January. The US government shutdown, ongoing concerns about the US-China trade war, the slowdown in global economic
Read moreToo little attention has been paid to the global rise in central bank policy rates in the past 6-7 months and its implications for economic growth, CPI-inflation and currency and rates markets. Central bank rate hikes in Emerging Market (EM) economies, along in some cases with central bank FX intervention and other policy measures, have helped stabilise under-pressure currencies, particularly
Read morePrime Minister May Theresa May yesterday evening survived a Conservative Party leadership vote, in line with our forecast, by 200 votes to 117. She will likely remain in office but it is debatable whether she is still in power. We now expect the delayed House of Commons’ vote on the draft Brexit deal to take place in the new year
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