Dollar’s recent weakness – Blip, not new trend

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

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Forecast review: USD, CNY, EM & global growth

We 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

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Emerging Market currencies: Hopes and Realities

Media coverage of Emerging Market currencies tends to oscillate between the very bearish and very bullish, with little differentiation between low and high-yielding currencies or between regional blocks let alone between the dozens of currencies still referred to, rightly or wrongly, as “emerging”. Price action in 2019 only partially vindicates this approach. News articles about the November EM currency rally

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Time is priceless but has a steep cost

While some countries, including Sweden and United states, have eschewed national lockdowns over the past nine months or so the vast majority have adopted unprecedented measures to deal with a once in a century pandemic which has so far cost almost 1.4 million lives. The strategy has invariably been a simple yet complex one – to save lives – but

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Dollar, Euro & Sterling in focus, Asian currencies under the radar screen

Much 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,

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Brazen ECB verbal intervention against Euro unwarranted and unlikely

Markets bereft of key macro data releases and policy events in recent days will be turning their attention tomorrow to the European Central Bank’s policy meeting. The consensus forecast, which we share, is that the ECB will leave its policy rates, including its deposit rate (-0.50%), and the modalities of its PEPP and APP unchanged. However, unnamed ECB Governing Council

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Major economies & currencies – What to look out for and why it matters

Price action in major currencies was again subdued last week. With few tier-one macro data releases for markets to trade off the focus was on the reaction function of governments and central banks to covid-19 related developments. Only a handful of currencies appreciated by more than 1% vs the Dollar last week and no major currency depreciated by more than

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Risk aversion, not panic, in face of uncertainty

Major currencies, equity markets and the price of crude oil since 8th June – the cycle low in the US Dollar – have exhibited reasonably limited directionality, narrow trading ranges and very low volatility, with the notable exception of currencies in Latin America. However this is not a case of more confident financial market participants finding their feet, in our

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