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We noted in “Renminbi depreciation – Case of déjà vu” (16 May 2019) that the Renminbi’s performance since early March had been very similar to that of May-June 2018 and that if, as we expected, history was to repeat itself the Renminbi would weaken further. While the Renminbi Nominal Effective Exchange Rate was broadly stable between 16th and 30th May,
Read moreOver-arching global themes, including the escalation in the trade war between the US and China since 5th May and global risk appetite jitters, offer a plausible explanation as to why the safe-haven Japanese Yen and Swiss Franc have both appreciated 2% in Nominal Effective Exchange Rate terms while the Chinese Renminbi has depreciated by as much. However, global macro and
Read moreThe Renminbi Nominal Effective Exchange Rate (NEER), which had appreciated 3.5% in the two months up to 5 March 2019 and then traded in a narrow 1% range in the following two months, has since 2 May depreciated 2.1% to its weakest level since 25th January. This is broadly line with our view that “the PBoC could conceivably slow or
Read moreMuch has happened in the past two months and yet the UK finds itself in a similar situation as in mid-October 2018 when it had just over five months to get a deal through parliament before its (original) exit date from the EU on 29th March. We have so far correctly forecast that the UK and EU would reach an
Read moreWe 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 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
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