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

This report updates the monthly seasonal patterns of 31 major Nominal Effective Exchange Rates(NEERs) going back to January 2010, using over two million daily data points with trade-weights derived from the<a href="https://www.bis.org/statistics/eer.htm" target="_blank" rel="noopener">BIS</a> (April 2019) and national central banks (see <a href="https://gallery.mailchimp.com/948838a86ce72ab6d8019a39d/files/15f4d8a9-56a4-46fd-9d78-607e5fd523e6/4X_Global_Research_Nominal_Effective_Exchange_Rates_Monthly_seasonal_patterns.pdf" target="_blank" rel="noopener">Nominal Effective Exchange Rates: Monthly seasonal patterns</a>, 10th January 2019). A number of factors can drive currency seasonality, including underlying seasonal patterns in balance of payment flows, the timing of public holidays and market liquidity. Identifying monthly seasonal patterns and why they may break down (significant changes in central bank or government policy, market positioning, macro data surprises and unexpected domestic events) can thus potentially augment investment returns and generate alpha.Unsurprisingly the Covid-19 pandemic – a once-in-a-lifetime “black swan” event – and accompanying measures such as national lockdowns severely disrupted typical monthly seasonal currency patterns in 2020, particularly in March and June (the trough and peak in global risk appetite) but also in Q4, with a few exceptions (see <a href="https://www.smartkarma.com/insights/monthly-currency-seasonality-down-and-out" target="_blank" rel="noopener">Monthly currency seasonality: Down and out?</a>, 4th January 2021). A number of emerging and developed market currencies continued to deviate from their 2010-2019 historical patterns in January 2021. In particular the “normally” strong Brazilian Real and to a lesser extent Colombian Peso and Polish Zloty depreciated. The Swiss Franc, contrary to history and in line with our forecast, also weakened slightly. The South African Rand depreciated 2.1%, five times as much as its 11-year historical average.Conversely the “normally” weak Turkish Lira was the outperformer, with the NEER appreciating nearly 4%. Sterling, the Australian Dollar and Norwegian Krone also outperformed in January relative to their historical seasonal patterns. However, and while early days, about 17 currencies, including the Dollar, Euro, Kiwi Dollar, Mexican Peso and most Asian currencies performed in line with their historical seasonality.Based on 2010-19 data Thai Baht, Norwegian Krone, Hungarian Forint and Polish Zloty were strongest currencies in the month of February while Korean Won was the weakest.

This report updates the monthly seasonal patterns of 31 major Nominal Effective Exchange Rates(NEERs) going back to January 2010, using over two million daily data points with trade-weights derived from theBIS (April 2019) and national central banks (see Nominal Effective Exchange Rates: Monthly seasonal patterns, 10th January 2019). A number of factors can drive currency seasonality, including underlying seasonal patterns in balance of payment flows, the timing of public holidays and market liquidity. Identifying monthly seasonal patterns and why they may break down (significant changes in central bank or government policy, market positioning, macro data surprises and unexpected domestic events) can thus potentially augment investment returns and generate alpha.Unsurprisingly the Covid-19 pandemic – a once-in-a-lifetime “black swan” event – and accompanying measures such as national lockdowns severely disrupted typical monthly seasonal currency patterns in 2020, particularly in March and June (the trough and peak in global risk appetite) but also in Q4, with a few exceptions (see Monthly currency seasonality: Down and out?, 4th January 2021). A number of emerging and developed market currencies continued to deviate from their 2010-2019 historical patterns in January 2021. In particular the “normally” strong Brazilian Real and to a lesser extent Colombian Peso and Polish Zloty depreciated. The Swiss Franc, contrary to history and in line with our forecast, also weakened slightly. The South African Rand depreciated 2.1%, five times as much as its 11-year historical average.Conversely the “normally” weak Turkish Lira was the outperformer, with the NEER appreciating nearly 4%. Sterling, the Australian Dollar and Norwegian Krone also outperformed in January relative to their historical seasonal patterns. However, and while early days, about 17 currencies, including the Dollar, Euro, Kiwi Dollar, Mexican Peso and most Asian currencies performed in line with their historical seasonality.Based on 2010-19 data Thai Baht, Norwegian Krone, Hungarian Forint and Polish Zloty were strongest currencies in the month of February while Korean Won was the weakest.

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

The attached file is a snapshot of the 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.

The attached file is a snapshot of the 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.

Media and analyst reports focussing on the scope for further US Dollar weakness and Emerging Market currency outperformance have continued to proliferate in the past month. The consensus view is still seemingly that a Democratic administration will fuel large US twin deficits and expectations of higher domestics inflation while Fed will keep rates on hold, eroding the value of Dollar assets. At the same time a pick-up in global confidence, economic growth and risk appetite will benefit EM and commodity currencies.While the “safe-haven” Dollar weakened sharply and EM currencies outperformed in the wake of the US elections on 3rd November recent facts tell a different story. Since 10th December the Dollar Nominal Effective Exchange Rate (NEER) and GDP-weighted baskets of developed and EM currencies have been broadly flat according to our calculations. Central European and Latin American currencies, which outperformed in November, have underperformed in past five weeks. Emerging Asian currencies, including the Chinese Renminbi, have done little since 10th December pointing to still active central bank FX management. This price action has broadly tallied with our near-term view that EM currencies will be “prone to sharp sell-offs (even if short-lived)”.Our analysis suggests that the steepness of the US Treasury yield curve rather than inter-country yield spreads matters more for the Dollar.However, we think central banks and sovereign wealth funds’ diversification out of Dollars into other reserve currencies, including Euro, Sterling, and Canadian, Australian and Kiwi Dollars, between May and early December was the main driver of Dollar depreciation.Dollar NEER’s stability since 10th despite a further 2.7% gain in the S&amp;P 500 suggests this diversification process has stalled, which we think is partly due to stretched valuations. At the same time price action points to a rotation out of the Euro into Sterling.We stick with our view that Dollar depreciation may not resume for another couple of months and will in any case not be as broad based as in November/early-December with markets paying greater attention to domestic factors, including valuations.

Media and analyst reports focussing on the scope for further US Dollar weakness and Emerging Market currency outperformance have continued to proliferate in the past month. The consensus view is still seemingly that a Democratic administration will fuel large US twin deficits and expectations of higher domestics inflation while Fed will keep rates on hold, eroding the value of Dollar assets. At the same time a pick-up in global confidence, economic growth and risk appetite will benefit EM and commodity currencies.While the “safe-haven” Dollar weakened sharply and EM currencies outperformed in the wake of the US elections on 3rd November recent facts tell a different story. Since 10th December the Dollar Nominal Effective Exchange Rate (NEER) and GDP-weighted baskets of developed and EM currencies have been broadly flat according to our calculations. Central European and Latin American currencies, which outperformed in November, have underperformed in past five weeks. Emerging Asian currencies, including the Chinese Renminbi, have done little since 10th December pointing to still active central bank FX management. This price action has broadly tallied with our near-term view that EM currencies will be “prone to sharp sell-offs (even if short-lived)”.Our analysis suggests that the steepness of the US Treasury yield curve rather than inter-country yield spreads matters more for the Dollar.However, we think central banks and sovereign wealth funds’ diversification out of Dollars into other reserve currencies, including Euro, Sterling, and Canadian, Australian and Kiwi Dollars, between May and early December was the main driver of Dollar depreciation.Dollar NEER’s stability since 10th despite a further 2.7% gain in the S&amp;P 500 suggests this diversification process has stalled, which we think is partly due to stretched valuations. At the same time price action points to a rotation out of the Euro into Sterling.We stick with our view that Dollar depreciation may not resume for another couple of months and will in any case not be as broad based as in November/early-December with markets paying greater attention to domestic factors, including valuations.

Dollar – Diversification, Rotation and Valuations

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

Our bet was that a USD low near DXY 89 would front run a risk off cycle for equities. Now that a low appears to be in place we are focusing on levels that would induce upside acceleration for the USD and bleed into the risk universe (AUD/JPY short). The pain trade is USD short covering in EM and Asia.Euro top near 1.23 and break below rising wedge support as pinpointed over a week ago.USD/ZAR and USD/TRY are favored long plays in EM. In Asia, we have touted buying USD vs KRW, THB and INR but also see a high conviction USD rally set up versus SGD and then IDR.Macro view is to sell the DXY near 92-94 for new lows but there will be a slew of trading swing points into the summer.

Our bet was that a USD low near DXY 89 would front run a risk off cycle for equities. Now that a low appears to be in place we are focusing on levels that would induce upside acceleration for the USD and bleed into the risk universe (AUD/JPY short). The pain trade is USD short covering in EM and Asia.Euro top near 1.23 and break below rising wedge support as pinpointed over a week ago.USD/ZAR and USD/TRY are favored long plays in EM. In Asia, we have touted buying USD vs KRW, THB and INR but also see a high conviction USD rally set up versus SGD and then IDR.Macro view is to sell the DXY near 92-94 for new lows but there will be a slew of trading swing points into the summer.

USD Acceleration Points that Will Bleed into Equity Risk

Turkey

The Turkish lira is the official currency of the Republic of Turkey. 

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TRY (USDTRY CURNCY)

Currency Seasonality’s Slow Comeback?

Identifying currencies' monthly seasonal patterns and why they may break down can potentially generate alpha. Seasonal patterns broke down in 2020...

Olivier Desbarres

FX Dashboard - Feb 2, 2021

Attached is the daily FX Dashboard that highlights dislocations in EM currency markets with the objective of identifying the leaders and laggards.

Gautam Jain, PhD, CFA

FX Dashboard - Feb 1, 2021

Attached is the daily FX Dashboard that highlights dislocations in EM currency markets with the objective of identifying the leaders and laggards.

Gautam Jain, PhD, CFA

Dollar – Diversification, Rotation and Valuations

Consensus view remains that USD will depreciate and EM currencies outperform. But that's not been the case in past 5 weeks as reserve...

Olivier Desbarres

USD Acceleration Points that Will Bleed into Equity Risk

Our bet was that a USD low near DXY 89 would front run a risk off cycle for equities. Focus is on upside acceleration levels that would bleed into...

Thomas Schroeder

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