Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In this note, we compare the performance of Latin American and Asian currencies as the former had started outperforming earlier this month but the latter has since caught up. The performance gap between the two remains at its widest in 10 years.Separately, the attached file is a snapshot of EM currency market, which we produce daily, and where 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 the broad market.

In this note, we compare the performance of Latin American and Asian currencies as the former had started outperforming earlier this month but the latter has since caught up. The performance gap between the two remains at its widest in 10 years.Separately, the attached file is a snapshot of EM currency market, which we produce daily, and where 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 the broad market.

FX Dashboard: LatAm FX Outperformance Versus Asia Did Not Last

As the Canadian dollar (CAD) has rallied following the hawkish surprise from the Bank of Canada, we go over the drivers behind our trade recommendation to buy the Mexican peso vs CAD and recommend holding the trade.Separately, the attached file is a snapshot of EM currency market, which we produce daily, and where 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 the broad market.

As the Canadian dollar (CAD) has rallied following the hawkish surprise from the Bank of Canada, we go over the drivers behind our trade recommendation to buy the Mexican peso vs CAD and recommend holding the trade.Separately, the attached file is a snapshot of EM currency market, which we produce daily, and where 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 the broad market.

FX Dashboard: Update on Mexican Peso Vs Canadian Dollar Trade Recommendation

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

Buy DXY 91 to 90.50 overshoot to a align with the SPX top of the rising wedge near 4,180 for a peak in risk. Late April is the ideal timeline for a USD low base to form as a rally platform for a risk off cycle in May/June.Expect some key lows for the USD in EM to pressure EM equities in coming months. USD in Asia bearish tactically into targeted lows to reverse positioning to long the USD.

Buy DXY 91 to 90.50 overshoot to a align with the SPX top of the rising wedge near 4,180 for a peak in risk. Late April is the ideal timeline for a USD low base to form as a rally platform for a risk off cycle in May/June.Expect some key lows for the USD in EM to pressure EM equities in coming months. USD in Asia bearish tactically into targeted lows to reverse positioning to long the USD.

The first round of Peru's presidential election has produced a negative outcome with a leftist candidate headed to a second round against a right-wing candidate with a high rejection rate. However, with the currency already reflecting these risks combined with record levels of international reserves, a buying opportunity could open up before the second round.Separately, the attached file is a snapshot of EM currency market, which we produce daily, and where 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 the broad market.

The first round of Peru's presidential election has produced a negative outcome with a leftist candidate headed to a second round against a right-wing candidate with a high rejection rate. However, with the currency already reflecting these risks combined with record levels of international reserves, a buying opportunity could open up before the second round.Separately, the attached file is a snapshot of EM currency market, which we produce daily, and where 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 the broad market.

FX Dashboard: Peru’s Currency and Rates Are Already Reflecting Election Risk

Founder

Olivier Desbarres

Exacting. Excellent. Exceeding. Exemplary.

4X Global Research

4X Global Research was founded in 2017 to provide institutional and corporate clients with the substantive research, high-quality analysis and thoughtful insight on Emerging and G20 economies and financial markets they need to make informed and timely decisions and gain an edge in their investments.

The Fed updated “dot-chart” of all FOMC members’ expectations of the appropriate policy rate points to only an incrementally less dovish stance. Based on a weighted average FOMC members still only expect one 25bp hike by end-2023, according to our estimates.Fed seems eager to cool market concerns that it will have no choice but to start hiking rates and to ultimately cap Treasury yields or at least slow recent increase in long-end yields. Price action in 2 and 5-year Treasuries suggests it partly succeeded, even if briefly.However, this still very dovish Fed policy rate outlook jars with its updated forecasts for US inflation and particularly GDP growth. The Fed’s twin arguments are that rapid growth this year will not be very inflationary due to slack in labour market and that following a period of inflation-undershoot it’s willing to accept a modest overshoot in PCE-inflation above 2%. The latter will have come as little surprise. The more contentious issue in our view is the Fed’s prognosis that core PCE-inflation will rise only modestly from 1.5% yoy in January to 2.2% yoy by end-year despite US GDP growth hitting a 37-year high of 6.5% this year.The Treasury yield curves have steepened further in the past 72 hours. This suggests that bond markets are not convinced about the Fed’s macro/policy matrix or that the Fed’s pick-up in Treasury purchases in the past couple of months will prove sufficient.Moreover, the 6.9% collapse in crude oil price yesterday and correction in US equities (particularly the more risk-sensitive Nasdaq) are clear pointers that markets remain concerned about the impact of higher US yields on global demand and equity valuations.FX markets have been more sanguine. Global FX volatility has risen in past 72 hours but remains in line with 10-year average and most currencies, particularly in Asia, have moved little. The safe-haven Dollar has proven relatively resilient, in line with our February view. While the Russian Rouble has (perhaps unsurprisingly) weakened most, most other high-yielding emerging market currencies have outperformed, thanks in large part to greater-than-expected central bank rate hikes in Brazil and Turkey of respectively 75bp and 200bp.  The risk now is that markets redouble their attention on central banks perceived as being “behind the curve”. These include the Norges Bank and CE3 central banks in our view.

The Fed updated “dot-chart” of all FOMC members’ expectations of the appropriate policy rate points to only an incrementally less dovish stance. Based on a weighted average FOMC members still only expect one 25bp hike by end-2023, according to our estimates.Fed seems eager to cool market concerns that it will have no choice but to start hiking rates and to ultimately cap Treasury yields or at least slow recent increase in long-end yields. Price action in 2 and 5-year Treasuries suggests it partly succeeded, even if briefly.However, this still very dovish Fed policy rate outlook jars with its updated forecasts for US inflation and particularly GDP growth. The Fed’s twin arguments are that rapid growth this year will not be very inflationary due to slack in labour market and that following a period of inflation-undershoot it’s willing to accept a modest overshoot in PCE-inflation above 2%. The latter will have come as little surprise. The more contentious issue in our view is the Fed’s prognosis that core PCE-inflation will rise only modestly from 1.5% yoy in January to 2.2% yoy by end-year despite US GDP growth hitting a 37-year high of 6.5% this year.The Treasury yield curves have steepened further in the past 72 hours. This suggests that bond markets are not convinced about the Fed’s macro/policy matrix or that the Fed’s pick-up in Treasury purchases in the past couple of months will prove sufficient.Moreover, the 6.9% collapse in crude oil price yesterday and correction in US equities (particularly the more risk-sensitive Nasdaq) are clear pointers that markets remain concerned about the impact of higher US yields on global demand and equity valuations.FX markets have been more sanguine. Global FX volatility has risen in past 72 hours but remains in line with 10-year average and most currencies, particularly in Asia, have moved little. The safe-haven Dollar has proven relatively resilient, in line with our February view. While the Russian Rouble has (perhaps unsurprisingly) weakened most, most other high-yielding emerging market currencies have outperformed, thanks in large part to greater-than-expected central bank rate hikes in Brazil and Turkey of respectively 75bp and 200bp.  The risk now is that markets redouble their attention on central banks perceived as being “behind the curve”. These include the Norges Bank and CE3 central banks in our view.

EM Currencies: Central Bank Friends and Foes

Brazil

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

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FX Dashboard: LatAm FX Outperformance Versus Asia Did Not Last

We compare the performance of Latin American and Asian currencies as the latter has caught up to the former. However, the performance gap between...

Gautam Jain, PhD, CFA

FX Dashboard: Update on Mexican Peso Vs Canadian Dollar Trade Recommendation

As the Canadian dollar (CAD) has rallied following the hawkish surprise from the BoC, we go over the drivers behind our trade recommendation to buy...

Gautam Jain, PhD, CFA

USD Buy Levels to Sync with Peak in Risk

Buy DXY 91 to 90.50 overshoot to a align with the SPX top of the rising wedge near 4,180 for a peak in risk. Late April is the ideal timeline for a...

Thomas Schroeder

FX Dashboard: Peru’s Currency and Rates Are Already Reflecting Election Risk

The first round of Peru's presidential election has produced a negative outcome. However, with the currency already reflecting these risks, a...

Gautam Jain, PhD, CFA

EM Currencies: Central Bank Friends and Foes

Fed's updated "dot chart" + forecasts and asset purchases have not convinced bond, equity or crude oil markets. FX reaction more sanguine but...

Olivier Desbarres

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52-week Range

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