Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In our monthly trade ideas recap note, we list the current trade recommendations that we make on a weekly basis and discuss whether any need to be closed. We have made a total of 15 trade recommendations so far, of which 11 are in the money.

In our monthly trade ideas recap note, we list the current trade recommendations that we make on a weekly basis and discuss whether any need to be closed. We have made a total of 15 trade recommendations so far, of which 11 are in the money.

Alpha Bites: Monthly Trade Ideas Recap – Jun 2021

In this note, we discuss the currencies that can perform well even if, following the sharp depreciation over the past two months, the US dollar becomes rangebound, taking away the impetus for EM currencies to appreciate on aggregate.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.

In this note, we discuss the currencies that can perform well even if, following the sharp depreciation over the past two months, the US dollar becomes rangebound, taking away the impetus for EM currencies to appreciate on aggregate.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: EM Currencies to Target in the Late Recovery Phase

Despite its recent underperformance, we reiterate our bullish view on the Mexican peso (MXN) as the country's growth outlook gets revised higher and the central bank will likely start tightening monetary policy this year. In our view, the concerns regarding the upcoming change at the helm of the central bank are overstated.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.

Despite its recent underperformance, we reiterate our bullish view on the Mexican peso (MXN) as the country's growth outlook gets revised higher and the central bank will likely start tightening monetary policy this year. In our view, the concerns regarding the upcoming change at the helm of the central bank are overstated.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 Mexican Peso

In this note, we discuss the Mexican central bank's most recent monetary policy meeting where it kept policy rates steady while reiterating that it expects inflation to converge to the target next year. We continue to expect the central bank to raise rates this year and emphasize our trade recommendations meant to capture that view.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

In this note, we discuss the Mexican central bank's most recent monetary policy meeting where it kept policy rates steady while reiterating that it expects inflation to converge to the target next year. We continue to expect the central bank to raise rates this year and emphasize our trade recommendations meant to capture that view.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Mexico – Delaying the Inevitable Monetary Tightening

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 past week has seen a short-lived flurry of market price action, with daily volatility in the US Dollar and equities edging higher on 30th April and again on 4th May. However, volatility overall has remained subdued, particularly in the benchmark US 10-year Treasury yield. Moreover, the Dollar NEER and US 10-year yields – increasingly a bellwether for financial markets – remain firmly within their multi-week ranges while the S&amp;P 500 yesterday closed in the middle of a narrow 3-week range of just 1.8%. US markets are seemingly sitting on the fence at this juncture, unwilling to take material directional positions given the uncertain outlook for US and global inflation and central banks’ reaction functions.  However, the gradual 6bp fall in the US benchmark 10-year Treasury yield between 29th April and 5th May to about 1.58% and the flattening of the 2s5s and 2s10s yield curves alongside a 0.4% gain in the Dollar NEER is noteworthy.Our take is that markets may have become marginally less worried that the Fed will have no choice but to tighten monetary policy sooner than it has indicated despite expectations that year-on-year US CPI-inflation will rise further in coming months. Moreover, the inverse relationship between the “safe-haven” Dollar and riskier assets has remained strong. US macro data released in the past week have been strong enough to put a floor under the S&amp;P 500 but not strong enough to push it to new highs. Finally we think that markets, in particular real-money funds, have once again been paying greater attention to valuations, including the relative cheapness of the Dollar.Notably most of the other major NEERs have also traded in narrow ranges since early March and few have moved much in the past month. Central banks, particularly in Asia, have been willing and able to keep their currencies on a short leash in order to maintain export competitiveness and minimise inflationary or deflationary pressures.Within Asia, the Taiwan Dollar is looking expensive relative to the Korean Won, in our view.

The past week has seen a short-lived flurry of market price action, with daily volatility in the US Dollar and equities edging higher on 30th April and again on 4th May. However, volatility overall has remained subdued, particularly in the benchmark US 10-year Treasury yield. Moreover, the Dollar NEER and US 10-year yields – increasingly a bellwether for financial markets – remain firmly within their multi-week ranges while the S&amp;P 500 yesterday closed in the middle of a narrow 3-week range of just 1.8%. US markets are seemingly sitting on the fence at this juncture, unwilling to take material directional positions given the uncertain outlook for US and global inflation and central banks’ reaction functions.  However, the gradual 6bp fall in the US benchmark 10-year Treasury yield between 29th April and 5th May to about 1.58% and the flattening of the 2s5s and 2s10s yield curves alongside a 0.4% gain in the Dollar NEER is noteworthy.Our take is that markets may have become marginally less worried that the Fed will have no choice but to tighten monetary policy sooner than it has indicated despite expectations that year-on-year US CPI-inflation will rise further in coming months. Moreover, the inverse relationship between the “safe-haven” Dollar and riskier assets has remained strong. US macro data released in the past week have been strong enough to put a floor under the S&amp;P 500 but not strong enough to push it to new highs. Finally we think that markets, in particular real-money funds, have once again been paying greater attention to valuations, including the relative cheapness of the Dollar.Notably most of the other major NEERs have also traded in narrow ranges since early March and few have moved much in the past month. Central banks, particularly in Asia, have been willing and able to keep their currencies on a short leash in order to maintain export competitiveness and minimise inflationary or deflationary pressures.Within Asia, the Taiwan Dollar is looking expensive relative to the Korean Won, in our view.

Sitting on Range-Trade Fence: Complacent Comfort

Canada

The Canadian dollar is the official currency of Canada. 

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CAD (USDCAD CURNCY)

Alpha Bites: Monthly Trade Ideas Recap – Jun 2021

In our monthly trade ideas recap note, we list our current recommendations and discuss whether any need to be closed. We have made a total of 15...

Gautam Jain, PhD, CFA

FX Dashboard: EM Currencies to Target in the Late Recovery Phase

In this note, we discuss the currencies that can perform well even if the US dollar becomes rangebound going forward, taking away the impetus for...

Gautam Jain, PhD, CFA

FX Dashboard: Stay Bullish on Mexican Peso

We reiterate our bullish view on the Mexican peso (MXN) as the country's growth outlook gets revised higher and the central bank will likely start...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Mexico – Delaying the Inevitable Monetary Tightening

While Mexico's central bank held rates steady at the meeting last week, we continue to expect it to raise rates this year and emphasize our trade...

Gautam Jain, PhD, CFA

Sitting on Range-Trade Fence: Complacent Comfort

Vol & directionality in Dollar, Treasuries and S&P 500 modest in past week and most EM currencies remain rangebound. Markets sitting on fence, but...

Olivier Desbarres

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