Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

We are not expecting the FOMC meeting tomorrow to be market-moving. Having said that, with the (negative) correlation between the US dollar and EM currencies the highest since 2012, any implications for the dollar from the meeting tomorrow would ripple through EM currencies. This impact is likely to get exacerbated by the rising correlations within the EM FX universe, which implies that we are currently in a "risk-on/risk-off" period.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

We are not expecting the FOMC meeting tomorrow to be market-moving. Having said that, with the (negative) correlation between the US dollar and EM currencies the highest since 2012, any implications for the dollar from the meeting tomorrow would ripple through EM currencies. This impact is likely to get exacerbated by the rising correlations within the EM FX universe, which implies that we are currently in a "risk-on/risk-off" period.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Cross-Correlations Between EM Currencies Rise Sharply

The Chilean peso has given up its outperformance from earlier this year following the central bank's dovish hike. We remain constructive on the currency on the back of the market-friendly outcome of the presidential primaries last weekend, upward revisions to Chile's growth, the outlook for copper prices, and the possibility that the central bank raises rates faster than currently priced.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

The Chilean peso has given up its outperformance from earlier this year following the central bank's dovish hike. We remain constructive on the currency on the back of the market-friendly outcome of the presidential primaries last weekend, upward revisions to Chile's growth, the outlook for copper prices, and the possibility that the central bank raises rates faster than currently priced.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Stay Bullish on the Chilean Peso

The Mexican peso has outperformed the broad EM currency complex and we expect it to continue to do so as more rate hikes are on the way due to persistently high inflation and the macroeconomic backdrop remains supportive. We reiterate our trade recommendation to go Long Mexican peso against Short Canadian dollar.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

The Mexican peso has outperformed the broad EM currency complex and we expect it to continue to do so as more rate hikes are on the way due to persistently high inflation and the macroeconomic backdrop remains supportive. We reiterate our trade recommendation to go Long Mexican peso against Short Canadian dollar.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Mexican Peso Should Continue Outperforming

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Macroeconomics

<ul>
<li>After a remarkable recovery from March to late June, TMI's Brazil Macro Sentiment indicator has been losing momentum in recent weeks together with BRL sentiment; political risk has resurfaced with the Bolsonaro vaccine scandal and Lula's lead in the polls</li>
<li>Our PBOC Easing-Tightening Diffusion suggests further downside to Chinese 10yr yields and the China FXI, having been strongly negatively correlated with both</li>
<li>While cryptocurrency sentiment remains subdued, negative momentum peaked in June; environmental concerns appear to be easing on the margin, aided by proof-of-stake optimism</li>
</ul><div class="content-highlight">TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


After a remarkable recovery from March to late June, TMI's Brazil Macro Sentiment indicator has been losing momentum in recent weeks together with BRL sentiment; political risk has resurfaced with the Bolsonaro vaccine scandal and Lula's lead in the polls
Our PBOC Easing-Tightening Diffusion suggests further downside to Chinese 10yr yields and the China FXI, having been strongly negatively correlated with both
While cryptocurrency sentiment remains subdued, negative momentum peaked in June; environmental concerns appear to be easing on the margin, aided by proof-of-stake optimism
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshots:  Brazil Macro Sentiment Peaking, PBOC Easing Not a Buy Signal Yet, Crypto Sentiment

The RRR cut by PBOC last week has thrown the market into confusion. Our view is that this is not the beginning of an aggressive easing cycle, rather a preemptive move to ensure that the economic recovery stays in place. However, the move has led to concerns about the extent of economic weakness in China ahead, which if true could be negative for the renminbi and, in turn, for EM FX.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

The RRR cut by PBOC last week has thrown the market into confusion. Our view is that this is not the beginning of an aggressive easing cycle, rather a preemptive move to ensure that the economic recovery stays in place. However, the move has led to concerns about the extent of economic weakness in China ahead, which if true could be negative for the renminbi and, in turn, for EM FX.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Spillover Risk from China to EM FX

Brazil

The Brazilian real is the official currency of the Federative Republic of Brazil.  

Price Gauge
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BRL (USDBRL CURNCY)

FX Dashboard: Cross-Correlations Between EM Currencies Rise Sharply

While we are not expecting the FOMC meeting tomorrow to be market-moving, we need to watch for any impact on the dollar as it would ripple through...

Gautam Jain, PhD, CFA

FX Dashboard: Stay Bullish on the Chilean Peso

We remain constructive on the Chilean peso on the back of the market-friendly outcome of the presidential primaries last weekend and upward...

Gautam Jain, PhD, CFA

FX Dashboard: Mexican Peso Should Continue Outperforming

We expect the Mexican peso (MXN) to continue outperforming as more rate hikes are on the way due to persistently high inflation and reiterate our...

Gautam Jain, PhD, CFA

TMI Snapshots: Brazil Macro Sentiment Peaking, PBOC Easing Not a Buy Signal Yet, Crypto Sentiment

After a remarkable 3-month recovery, our Brazil Macro Sentiment has pulled back as political risk is resurfacing with Bolsonaro's vaccine scandal...

Elan Gore

FX Dashboard: Spillover Risk from China to EM FX

The RRR cut by PBOC last week has led to concerns about the extent of economic weakness in China ahead, which if true could be negative for the...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)