Head of Research and Global Chief Strategist, Steno Research

Andreas Steno

Head of Research and Global Chief Strategist

Macro and Geopolitical Research House

Steno Research

Steno Research is a new macro and geopolitical research house. We are based out of Copenhagen, Denmark, but have an international team and a strong network of sources and partners around the world. The team is lead by Andreas Steno, previous global head of strategy at Nordea Bank, and Mikkel Rosenvold, former chief consultant in the Danish Ministry of Finance.

Cross Asset Strategy

<ul>
<li>Every month, we assess the risk/reward in asset allocation via our Macro Regime Indicator framework, where we use our asset allocation model to provide input for our thought process and positioning ahead of the new month’s trading.</li>
<li>In early July we wrote that: “We remain a bit split on whether we will see a pronounced change of the Macro Regime from “down, down, down” (in liquidity, inflation and growth) to Goldilocks without QE with inflation down, liquidity down and growth slightly up.</li>
<li>Our portfolio will hence combine the best of the two regimes for the month of July.</li>
</ul>


Every month, we assess the risk/reward in asset allocation via our Macro Regime Indicator framework, where we use our asset allocation model to provide input for our thought process and positioning ahead of the new month’s trading.
In early July we wrote that: “We remain a bit split on whether we will see a pronounced change of the Macro Regime from “down, down, down” (in liquidity, inflation and growth) to Goldilocks without QE with inflation down, liquidity down and growth slightly up.
Our portfolio will hence combine the best of the two regimes for the month of July.


Macro Regime Indicator: PMIs to drive price action together with headline inflation

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>The Turkish lira has become the worst-performing currency this year as the central bank is holding the policy rate steady despite sharply accelerating inflation, leading to highly negative real rates.</li>
<li>The lira is effectively in a vicious cycle: weakening currency adds to inflationary pressures, which with the central bank on hold means real rates become more negative, hurting the currency.</li>
<li>High inflation is also weighing on the economic outlook, which combined with worsening current account and fiscal deficits and depleting international reserves, is adding to the depreciation pressure.</li>
</ul>


The Turkish lira has become the worst-performing currency this year as the central bank is holding the policy rate steady despite sharply accelerating inflation, leading to highly negative real rates.
The lira is effectively in a vicious cycle: weakening currency adds to inflationary pressures, which with the central bank on hold means real rates become more negative, hurting the currency.
High inflation is also weighing on the economic outlook, which combined with worsening current account and fiscal deficits and depleting international reserves, is adding to the depreciation pressure.


Turkish Lira Takes the Helm as the Worst-Performing EM Currency

<ul>
<li>The dollar has strengthened significantly since Russia's invasion of Ukraine, which has led to a broad risk-off environment. Among EM currencies, the worst performer has been the Hungarian forint. </li>
<li>Adding to the economic woes resulting from Russia's aggression, the forint has suffered as the central bank has signaled less aggressive monetary tightening even with inflation hitting a two-decade high.</li>
<li>PM Orban has worsened the situation with his pre-election spending and by going against the EU by resisting further sanctions on Russia. Relatedly, funding from the EU is at risk.</li>
</ul>


The dollar has strengthened significantly since Russia's invasion of Ukraine, which has led to a broad risk-off environment. Among EM currencies, the worst performer has been the Hungarian forint. 
Adding to the economic woes resulting from Russia's aggression, the forint has suffered as the central bank has signaled less aggressive monetary tightening even with inflation hitting a two-decade high.
PM Orban has worsened the situation with his pre-election spending and by going against the EU by resisting further sanctions on Russia. Relatedly, funding from the EU is at risk.


Which EM Currency Has Suffered the Most Since Russia’s Invasion of Ukraine?

<ul>
<li>In line with my view that the dollar remains strong in the near term, one of the trading strategies that I have suggested is relative-value trades within EM currencies.</li>
<li>The volatility of EM currencies continues to rise, which in theory is supportive of relative-value trades as such environments are usually accompanied by wide dispersion among EM currencies. </li>
<li>However, I find that cross-correlations among EM currencies have risen, leading to a narrowing of dispersion between them, which means the environment is no longer supportive of relative-value trades.</li>
</ul>


In line with my view that the dollar remains strong in the near term, one of the trading strategies that I have suggested is relative-value trades within EM currencies.
The volatility of EM currencies continues to rise, which in theory is supportive of relative-value trades as such environments are usually accompanied by wide dispersion among EM currencies. 
However, I find that cross-correlations among EM currencies have risen, leading to a narrowing of dispersion between them, which means the environment is no longer supportive of relative-value trades.


Is the Environment Supportive of EM FX Relative-Value Trades?

<ul>
<li>In line with my view of the dollar remains strong in the near term, one of the trading strategies that I have suggested hedging an EMFX portfolio with the euro.</li>
<li>I show that the hedge has performed well by breaking down and comparing the return of the hedged portfolio with the unhedged version.</li>
<li>For me to recommend taking off the euro hedge, we would need to see the volatility of US rates and the probability of recession falling. </li>
</ul>


In line with my view of the dollar remains strong in the near term, one of the trading strategies that I have suggested hedging an EMFX portfolio with the euro.
I show that the hedge has performed well by breaking down and comparing the return of the hedged portfolio with the unhedged version.
For me to recommend taking off the euro hedge, we would need to see the volatility of US rates and the probability of recession falling. 


How Well Is Hedging EM Currencies with the Euro Working?

Poland

The Polish Zloty dollar is the official currency of Poland

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Macro Regime Indicator: PMIs to drive price action together with headline inflation

Every month, we assess the risk/reward in asset allocation via our Macro Regime Indicator framework, where we use our asset allocation model to...

Steno Research

Turkish Lira Takes the Helm as the Worst-Performing EM Currency

The Turkish lira is effectively in a vicious cycle: weakening currency adds to inflationary pressures, which with the central bank on hold means...

Gautam Jain, PhD, CFA

Which EM Currency Has Suffered the Most Since Russia’s Invasion of Ukraine?

Adding to the economic woes from Russia's aggression, the Hungarian forint has suffered as the central bank has signaled less aggressive monetary...

Gautam Jain, PhD, CFA

Is the Environment Supportive of EM FX Relative-Value Trades?

The rise in the volatility of EM currencies should in theory be supportive of relative-value trades, but of late, the dispersion between them is...

Gautam Jain, PhD, CFA

How Well Is Hedging EM Currencies with the Euro Working?

I go over the performance of one of the trading strategies that I have suggested in line with my view of the dollar remaining strong in the near...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)