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.

FX & Rates

We turned bullish GBP/EUR in late-June and re-reiterated our constructive view in mid-July and early-August and the cross duly hit a 76-week high of about 1.182 on 11th August. In line with our expectations, historical monthly seasonal patterns were up-ended thanks in part to the positive impact of international travel restrictions on the UK’s tourism balance and the Bank of England turning more hawkish in absolute terms and relative to the ECB.However, since then Sterling has weakened about 1.1% against the Euro and 1.5% in NEER terms, despite the Bank of England turning even more hawkish, markets now pricing almost three 25bp rate hikes in 2022 and a sharp widening of the Gilt-Bund yield spread.The reason in our view is that Gilt yields have risen because of market expectations that UK CPI-inflation will rise from already elevated levels despite weak domestic economic growth, which renders UK financial assets (including Sterling) less attractive.UK GDP growth slowed in July despite the government having removed on 19th July all but a few social distancing restrictions in England and PMI data suggest GDP growth remained weak in August-September. Notably the deceleration in economic growth in recent months was likely more pronounced in the UK than in the Eurozone, albeit from higher levels. The UK economy faces a number of headwinds, namely i) acute labour shortages and supply-chain constraints and bottlenecks; and ii) multiple challenges to domestic demand.On the demand-front the issue is not weak household purchasing power or strained corporate balance sheets but rather tepid consumer and business confidence as a result of planned tax increases in April 2022, furlough having ended on 30th September, fuel-shortages, rising CPI-inflation and likelihood that Bank of England will hike rates next year. The risk is that the current shortage of fuel at forecourts will not be a one-off, in our view, because the ratio of vehicles to fuel forecourts has risen materially in the UK since 2000.In the current context we find it challenging to build a bullish short-term case for GBP/EUR.

We turned bullish GBP/EUR in late-June and re-reiterated our constructive view in mid-July and early-August and the cross duly hit a 76-week high of about 1.182 on 11th August. In line with our expectations, historical monthly seasonal patterns were up-ended thanks in part to the positive impact of international travel restrictions on the UK’s tourism balance and the Bank of England turning more hawkish in absolute terms and relative to the ECB.However, since then Sterling has weakened about 1.1% against the Euro and 1.5% in NEER terms, despite the Bank of England turning even more hawkish, markets now pricing almost three 25bp rate hikes in 2022 and a sharp widening of the Gilt-Bund yield spread.The reason in our view is that Gilt yields have risen because of market expectations that UK CPI-inflation will rise from already elevated levels despite weak domestic economic growth, which renders UK financial assets (including Sterling) less attractive.UK GDP growth slowed in July despite the government having removed on 19th July all but a few social distancing restrictions in England and PMI data suggest GDP growth remained weak in August-September. Notably the deceleration in economic growth in recent months was likely more pronounced in the UK than in the Eurozone, albeit from higher levels. The UK economy faces a number of headwinds, namely i) acute labour shortages and supply-chain constraints and bottlenecks; and ii) multiple challenges to domestic demand.On the demand-front the issue is not weak household purchasing power or strained corporate balance sheets but rather tepid consumer and business confidence as a result of planned tax increases in April 2022, furlough having ended on 30th September, fuel-shortages, rising CPI-inflation and likelihood that Bank of England will hike rates next year. The risk is that the current shortage of fuel at forecourts will not be a one-off, in our view, because the ratio of vehicles to fuel forecourts has risen materially in the UK since 2000.In the current context we find it challenging to build a bullish short-term case for GBP/EUR.

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

One degree of frustration over the past several weeks and months for Bond market bears is the lack of strong follow through relative to expectations in US economic data. This has raised questions about the credibility of the US recovery.It has partly, or perhaps largely, explained the low levels on yields we see at the long end of the curve, both in nominal and real terms.<a target="_blank">However, no trend lasts forever.</a>The chart below gives an idea where we might stand with regards to this underwhelming data. What is indicates is that the worst of it might be now or already behind us, either because expectations have been lowered and are thus easier to beat, and/or that we are approaching another turning point in the economy with a brighter outlook.

One degree of frustration over the past several weeks and months for Bond market bears is the lack of strong follow through relative to expectations in US economic data. This has raised questions about the credibility of the US recovery.It has partly, or perhaps largely, explained the low levels on yields we see at the long end of the curve, both in nominal and real terms.However, no trend lasts forever.The chart below gives an idea where we might stand with regards to this underwhelming data. What is indicates is that the worst of it might be now or already behind us, either because expectations have been lowered and are thus easier to beat, and/or that we are approaching another turning point in the economy with a brighter outlook.

The delivery of the ECB's policy stance and guidance this week raises questions about what is going on and which direction it is facing. The choice of words by the President is particularly interesting.

The delivery of the ECB's policy stance and guidance this week raises questions about what is going on and which direction it is facing. The choice of words by the President is particularly interesting. 

Technical Analysis

Further signs of USD weakness are coming through. The breaks on the DXY Index as well as the ones on key major currency pairs show that there is still more USD weakness to be seen before we might stabilise.

Further signs of USD weakness are coming through. The breaks on the DXY Index as well as the ones on key major currency pairs show that there is still more USD weakness to be seen before we might stabilise.

As German 10-year yield has risen, it is now testing an important zone of resistance levels What happens here around minus 39 bps to minus 36 bps is going to be key, at least in the short term.If it is overcome, we could be on our way to minus 15 bps over the coming weeks which would likely support EURUSD given how US yields seem to lack a strong trend

As German 10-year yield has risen, it is now testing an important zone of resistance levels What happens here around minus 39 bps to minus 36 bps is going to be key, at least in the short term.If it is overcome, we could be on our way to minus 15 bps over the coming weeks which would likely support EURUSD given how US yields seem to lack a strong trend

United States

The euro is the official currency of the European Economic & Monetary Union.  The US dollar is the official currency of the United States of America.

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Sterling – Fuel for Thought

GBP/EUR down since 76-week high on 11 Aug despite widening of 2-yr Gilt-Bund yield spread. BoE & markets more hawkish but for wrong reasons....

Olivier Desbarres

US Economy - How Low Is Low?

A refreshed look at US economic data relative to expectations reveals we might be at another turning point which could see a brighter future

Shyam Devani

Europe & The ECB - The Lady

Does the choice of language by the ECB President reveal what might be happening beneath the surface? Ultimately actions speak louder than words.

Shyam Devani

Fresh USD Breaks

Further signs of USD weakness are coming through against major currencies. These all suggest there is still more USD weakness to be seen at least...

Shyam Devani

Testing Time for German 10Y Yield

The rise in German yields has now taken the market to important levels that need to be watched in the short term. Any higher from here would amount...

Shyam Devani

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