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In the past nine weeks major currencies and global equity markets have traded broadly in line with our expectations. The US Dollar has traded in a very narrow range, confounding consistently bearish market expectations. Similarly, most emerging Asian currencies have barely moved, pointing to the ability and willingness of Asian central bank to intervene in FX markets in a bid
Read moreThis report updates the monthly seasonal patterns of 31 major Nominal Effective Exchange Rates (NEERs) going back to January 2010, using over two million daily data points with trade-weights derived from the BIS (April 2019) and national central banks (see Nominal Effective Exchange Rates: Monthly seasonal patterns, 10th January 2019). A number of factors can drive currency seasonality, including underlying
Read moreMedia and analyst reports focussing on the scope for further US Dollar weakness and Emerging Market currency outperformance have continued to proliferate in the past month. The consensus view is still seemingly that a Democratic administration will fuel large US twin deficits and expectations of higher domestics inflation while Fed will keep rates on hold, eroding the value of Dollar
Read moreThis report updates the monthly seasonal patterns of 31 major Nominal Effective Exchange Rates (NEERs) going back to January 2010, using over two million daily data points with trade-weights derived from the BIS (April 2019) and national central banks (see “Nominal Effective Exchange Rates: Monthly seasonal patterns”, 10 January 2019). A number of factors can drive currency seasonality, including underlying
Read moreWe concluded in Far more to Renminbi than USD/CNY cross (8th December 2020) that the risk was tilted towards the People’s Bank of China further weakening the Renminbi Nominal Effective Exchange Rate (NEER) in coming weeks given deflationary pressures. So far we have been proven broadly right, with the NEER down about 0.2% in the past fortnight while the month-on-month
Read moreThe prevailing market view, as depicted in a recent Reuters article, is seemingly that Chinese policy makers are happy to allow further Renminbi appreciation versus the Dollar driven by a rising domestic trade surplus and strong capital account inflows. The Renminbi has indeed appreciated 2.2% versus the Dollar since our last report on 22nd October (PBoC likely to keep Renminbi
Read moreOnly four currencies have appreciated by more than 4% versus US Dollar since end-July: the high-yielding South African Rand (4.6%) and Mexican Peso (5.8%), the Chinese Renminbi (4.4%) and Korean Won (5.2%). The Renminbi’s steady pace of appreciation will, all other things equal, put further downward pressure on Chinese headline CPI-inflation (1.7% yoy in September) and dent export competitiveness. This
Read moreMuch of the market focus in recent months has been on major reserve currencies, namely: The US Dollar which, contrary to bearish expectations and in line with our benign Dollar view, has treaded water in the past six weeks and since the Fed’s tweak on 27th August to its dual inflation and employment mandate; The Euro’s rapid appreciation in July,
Read moreChinese GDP growth (seasonally-adjusted) was 11.5% qoq in Q2. This was stronger than consensus forecast (+9.6% qoq) and more than reversed Q1 contraction of 9.8% qoq. This record-high growth reflects both a post-lockdown bounce in economic activity and of course extremely “favourable” base effects. This is pertinent for China but also its key major trading partners and global economy. China
Read moreWhile the United States and China have not gone as far as re-introducing or increasing tariffs on each others’ imports, the war of words between the two trading superpowers has clearly escalated with Hong Kong caught in the middle. In line with our expectations the Chinese Renminbi has depreciated versus (a weaker) Dollar and in nominal effective exchange rate terms
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