Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In this note, we examine the rise in cross-correlations among EM currencies and its implications for the asset class.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we examine the rise in cross-correlations among EM currencies and its implications for the asset class.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

FX Dashboard: Rising Correlations Add to Overall Volatility

In this note, we reiterate our recommendation to be long the Polish zloty (PLN) against the Czech koruna (CZK), as the former has underperformed.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we reiterate our recommendation to be long the Polish zloty (PLN) against the Czech koruna (CZK), as the former has underperformed.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

FX Dashboard: Polish Zloty Underperformance Looks Overdone

In this note, we discuss the high risk premia being reflected in Brazilian assets, particular the currency and rate markets.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we discuss the high risk premia being reflected in Brazilian assets, particular the currency and rate markets.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

FX Dashboard: Brazilian Assets Build Risk Premia

In this note, we compare and contrast the correction in EM currencies in the current reflationary scare with a similar episode in 2013.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we compare and contrast the correction in EM currencies in the current reflationary scare with a similar episode in 2013.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 analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

FX Dashboard: Taper Tantrum Vs Current Reflationary Scare – Part 1

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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 British Chancellor of the Exchequer Rishi Sunak will on 3rd March, at around 12.30 UK time, present to the House of Commons the annual budget for the United Kingdom. The ruling Conservative Party has a significant working majority of 87 seats in the lower house of parliament and we expect the budget to pass pretty smoothly. While revenue and spending measures are very important for UK households and companies and the economy’s medium-term direction, our historical analysis suggests that that financial markets’ short-term reaction to the annual budget announcement is muted. In the past six budgets the Sterling NEER has on average depreciated about 0.1% on budget day while the FTSE 100 has closed up about 0.3%. In the five trading sessions following the 2015-2018 budgets, the Sterling NEER was on average unchanged while the FTSE 100 on average only gained about 0.45%, with little variability. The only expectation to this pattern was the March 2020 budget but acute global risk aversion, rather than the UK budget, drove Sterling and the FTSE 100 weaker in our view. If anything the reaction of short-end Gilts to previous budget announcements has been even more tepid.We see two inter-connected reasons for this. First, British governments in recent years have “pre-announced” most of their tax and spend measures to mainstream media, even if they often hold back a few vote-winning fiscal surprises to unveil on budget day. Second, budget announcements contain such a wide array of tax and spend measures that gauging their short, medium and long-run impact on the economy, Sterling, Gilts or equity markets remains an exercise in faith as much as rigorous analysis.This year’s “two-pronged transitional” budget will be no different, in our view. Policies largely outside of the Chancellor’s remit, including the pace of UK vaccination, will likely continue to be the main driver of domestic financial markets, including Sterling.However, expect Sunak to confirm both a (temporary) extension of Covid-19 related fiscal measures to support the economy during lockdown as well as modest tax hikes regardless of the government’s very low financing costs, in line with our September forecast.

The British Chancellor of the Exchequer Rishi Sunak will on 3rd March, at around 12.30 UK time, present to the House of Commons the annual budget for the United Kingdom. The ruling Conservative Party has a significant working majority of 87 seats in the lower house of parliament and we expect the budget to pass pretty smoothly. While revenue and spending measures are very important for UK households and companies and the economy’s medium-term direction, our historical analysis suggests that that financial markets’ short-term reaction to the annual budget announcement is muted. In the past six budgets the Sterling NEER has on average depreciated about 0.1% on budget day while the FTSE 100 has closed up about 0.3%. In the five trading sessions following the 2015-2018 budgets, the Sterling NEER was on average unchanged while the FTSE 100 on average only gained about 0.45%, with little variability. The only expectation to this pattern was the March 2020 budget but acute global risk aversion, rather than the UK budget, drove Sterling and the FTSE 100 weaker in our view. If anything the reaction of short-end Gilts to previous budget announcements has been even more tepid.We see two inter-connected reasons for this. First, British governments in recent years have “pre-announced” most of their tax and spend measures to mainstream media, even if they often hold back a few vote-winning fiscal surprises to unveil on budget day. Second, budget announcements contain such a wide array of tax and spend measures that gauging their short, medium and long-run impact on the economy, Sterling, Gilts or equity markets remains an exercise in faith as much as rigorous analysis.This year’s “two-pronged transitional” budget will be no different, in our view. Policies largely outside of the Chancellor’s remit, including the pace of UK vaccination, will likely continue to be the main driver of domestic financial markets, including Sterling.However, expect Sunak to confirm both a (temporary) extension of Covid-19 related fiscal measures to support the economy during lockdown as well as modest tax hikes regardless of the government’s very low financing costs, in line with our September forecast.

Transitional UK Budget Unlikely to Rattle Markets

United Kingdom

The British Pound Sterling is the official currency of The United Kingdom. 

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FX Dashboard: Rising Correlations Add to Overall Volatility

Attached is our daily FX Dashboard that helps identify dislocations among EM currencies. In this note, we discuss the implications of the rise in...

Gautam Jain, PhD, CFA

FX Dashboard: Polish Zloty Underperformance Looks Overdone

Attached is our daily FX Dashboard that helps identify dislocations among EM currencies. In this note, we reiterate our recommendation to be long...

Gautam Jain, PhD, CFA

FX Dashboard: Brazilian Assets Build Risk Premia

Attached is our daily FX Dashboard that helps identify dislocations among EM currencies. In this note, we discuss the high risk premia being...

Gautam Jain, PhD, CFA

FX Dashboard: Taper Tantrum Vs Current Reflationary Scare – Part 1

Attached is our daily FX Dashboard that helps identify dislocations among EM currencies. In this note, we compare the correction this year in EM...

Gautam Jain, PhD, CFA

Transitional UK Budget Unlikely to Rattle Markets

Sunak will on 3 March present annual UK budget. Media will be tabulating winners & losers. But history suggests that impact of two-pronged...

Olivier Desbarres

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