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

Market volatility has been reasonably subdued in recent weeks, despite acute event (and macro data) risk in the next four weeks, including of course US presidential elections on 3rd November, and a number of significant macro, policy and geopolitical developments.In the past month volatility in major developed and emerging market currencies versus the US Dollar has only risen materially in the high-yielding Turkish Lira and Mexican Peso and the low-yielding Polish Zloty, Korean Won and more surprisingly the Taiwan Dollar.However, this is not a case of more confident financial market participants finding their feet, in our view, but rather a reflexion of financial markets unable to see through the smoke and reluctant to pit themselves against their peers going into year-end and/or test monetary authorities’ resolve at time of acute uncertainty. S&amp;P 500 (realized) volatility has edged lower since its early September spike, with markets seemingly undecided whether a Trump or Biden victory will be a net positive for equities.For similar reasons the Dollar, Euro, Sterling, Yen and Swiss Franc have shown little directionality since late-July. Headwinds and tailwinds for these reserve currencies have either tended to cancel each other or simply fade, leaving market participants in two-minds and opting for the path of least regret. Back in November 2019 we correctly predicted that “global FX volatility would rise in coming weeks, with the potential for a volatility spike in mid-December”. We once again think the risk is biased towards FX volatility rising in coming weeks, particularly given the still very uncertain outcome of US elections to be held in just 26 days.We think the risk of higher volatility is most acute if US President Trump once again defies opinion polls to win or if a prolonged period of uncertainty ensues in the event of either candidate contesting the result of a very close election.Moreover, the odds Sterling volatility spiking higher in the next fortnight are high, in our view, whatever the outcome of UK-EU negotiations over a new trade deal which will likely reach a crescendo ahead of the European Council meeting on 15-16 October.

Market volatility has been reasonably subdued in recent weeks, despite acute event (and macro data) risk in the next four weeks, including of course US presidential elections on 3rd November, and a number of significant macro, policy and geopolitical developments.In the past month volatility in major developed and emerging market currencies versus the US Dollar has only risen materially in the high-yielding Turkish Lira and Mexican Peso and the low-yielding Polish Zloty, Korean Won and more surprisingly the Taiwan Dollar.However, this is not a case of more confident financial market participants finding their feet, in our view, but rather a reflexion of financial markets unable to see through the smoke and reluctant to pit themselves against their peers going into year-end and/or test monetary authorities’ resolve at time of acute uncertainty. S&amp;P 500 (realized) volatility has edged lower since its early September spike, with markets seemingly undecided whether a Trump or Biden victory will be a net positive for equities.For similar reasons the Dollar, Euro, Sterling, Yen and Swiss Franc have shown little directionality since late-July. Headwinds and tailwinds for these reserve currencies have either tended to cancel each other or simply fade, leaving market participants in two-minds and opting for the path of least regret. Back in November 2019 we correctly predicted that “global FX volatility would rise in coming weeks, with the potential for a volatility spike in mid-December”. We once again think the risk is biased towards FX volatility rising in coming weeks, particularly given the still very uncertain outcome of US elections to be held in just 26 days.We think the risk of higher volatility is most acute if US President Trump once again defies opinion polls to win or if a prolonged period of uncertainty ensues in the event of either candidate contesting the result of a very close election.Moreover, the odds Sterling volatility spiking higher in the next fortnight are high, in our view, whatever the outcome of UK-EU negotiations over a new trade deal which will likely reach a crescendo ahead of the European Council meeting on 15-16 October.

Event Risk and Market Volatility: Partners in Crime

Much of the market focus in recent months has been on major reserve currencies, namely:<ul>
<li>The US Dollar which, contrary to bearish expectations and in line with our <a href="https://www.smartkarma.com/insights/warnings-about-us-economy-and-dollar-overblown" target="_blank" rel="noopener">benign Dollar view</a>, has treaded water in the past six weeks and since the Fed’s tweak on 27th August to its dual inflation and employment mandate; </li>
<li>The Euro’s rapid appreciation in July, its more prosaic performance in August and the first half of September and speculation that the European Central Bank would try to jawbone the currency weaker. Instead the ECB as its policy meeting on 10th September resorted to verbal intervention “light”, in line with our core scenario that <a href="https://www.smartkarma.com/insights/brazen-ecb-verbal-intervention-against-euro-unwarranted-and-unlikely" target="_blank" rel="noopener">Brazen ECB verbal intervention against Euro was unwarranted and unlikely</a> (9th September 2020).</li>
<li>Sterling’s collapse last week and only partial recovery in the past four trading sessions. We are sticking to our view that the UK economy and Sterling face four potential headwinds in coming months, including i) fiscal stimulus measures being unwound, ii) a no-deal Brexit, iii) higher taxes and iv) a further re-tightening of lockdown measures in coming months (see <a href="https://www.smartkarma.com/insights/uk-sterling-facing-potential-quadruple-whammy" target="_blank" rel="noopener">UK &amp; Sterling facing potential quadruple whammy</a>, 4th September 2020).</li>
</ul>Conversely, Asian currencies have seemingly fallen under the radar screen, for good reason. They have exhibited little directionality within very narrow ranges in the past month, particularly relative to high-yielding emerging market currencies. We think this is the result of Asian central banks’ ability and willingness to keep their currencies on a tight leash, in order to minimise their disinflationary impact and maintain export competitiveness while at the same time capping the cost to governments, corporates and households of servicing sizeable foreign-currency denominated debt.The Renminbi Nominal Effective Exchange Rate’s 2% appreciation in the past month, while unspectacular, is noteworthy and will be the topic of a forthcoming report.

Much of the market focus in recent months has been on major reserve currencies, namely:
The US Dollar which, contrary to bearish expectations and in line with our benign Dollar view, has treaded water in the past six weeks and since the Fed’s tweak on 27th August to its dual inflation and employment mandate; 
The Euro’s rapid appreciation in July, its more prosaic performance in August and the first half of September and speculation that the European Central Bank would try to jawbone the currency weaker. Instead the ECB as its policy meeting on 10th September resorted to verbal intervention “light”, in line with our core scenario that Brazen ECB verbal intervention against Euro was unwarranted and unlikely (9th September 2020).
Sterling’s collapse last week and only partial recovery in the past four trading sessions. We are sticking to our view that the UK economy and Sterling face four potential headwinds in coming months, including i) fiscal stimulus measures being unwound, ii) a no-deal Brexit, iii) higher taxes and iv) a further re-tightening of lockdown measures in coming months (see UK &amp; Sterling facing potential quadruple whammy, 4th September 2020).
Conversely, Asian currencies have seemingly fallen under the radar screen, for good reason. They have exhibited little directionality within very narrow ranges in the past month, particularly relative to high-yielding emerging market currencies. We think this is the result of Asian central banks’ ability and willingness to keep their currencies on a tight leash, in order to minimise their disinflationary impact and maintain export competitiveness while at the same time capping the cost to governments, corporates and households of servicing sizeable foreign-currency denominated debt.The Renminbi Nominal Effective Exchange Rate’s 2% appreciation in the past month, while unspectacular, is noteworthy and will be the topic of a forthcoming report.

Dollar, Euro & Sterling in Focus, Asian Currencies Under the Radar Screen

Taiwan

The New Taiwan dollar is the official currency of Taiwan

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TWD (USDTWD CURNCY)

Event Risk and Market Volatility: Partners in Crime

Market volatility has been reasonably subdued in recent weeks, despite acute event (and macro data) risk in the next four weeks, including of...

Olivier Desbarres

Dollar, Euro & Sterling in Focus, Asian Currencies Under the Radar Screen

Much of the market focus in recent months has been on major reserve currencies, namely: The US Dollar which, contrary to bearish expectations and...

Olivier Desbarres

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)