Founder

Olivier Desbarres

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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

Following key central bank policy meetings last week in Australia, the US and UK, short-end interest rate markets have turned more dovish. We had argued back on 2nd November that “hawkish interest rate markets may have got slightly ahead of themselves.”The Federal Reserve and certainly the RBA cooled market expectations of rate hikes while the Bank of England flat-footed markets by leaving its policy rate unchanged at a record-low 0.10%. This was in line with our view that the Fed would “once again put some distance between the start of the QE taper and the start of the rate hiking cycle.”Within developed economies only the RBNZ and Bank of Canada have so far ended their asset purchases and only the Norges Bank and RBNZ have hiked their policy rates (by 25bp each) since the pandemic struck 20 months ago. In comparison 10 out of 21 major EM central banks have hiked their policy rate at least once in the past six months.The spread between the EM and developed economy central bank policy rate, which had narrowed from about 413bp in March 2020 to 360bp last summer, has thus since widened to a 3-year high of 423bp. The pattern was similar following the Great Financial Crisis.Monetary policy tightening is proceeding more slowly in developed economies despite headline CPI-inflation rising to a 13-year high of 3.9% yoy in September while in EM it was stable at 3.3% yoy. EM central banks, at least as a whole, have got a handle on inflation. As a result in developed economies the central bank “real” policy rate collapsed to a multi-decade low of -4.0% at end-September, compared to +0.8% in EM. Excluding India and China the EM central bank real policy rate was still -2.0%, or twice as large as the GDP-weighted real rate in developed economies.This divergence in real policy rates partly explains why EM currencies have outperformed developed currencies since late-April, in our view.If the gap between developed and EM CPI-inflation continues to widen we think developed interest rate markets may once again find it difficult to buy into these central banks’ ultimately dovish thinking and short-end government yields may start to rise again.

Following key central bank policy meetings last week in Australia, the US and UK, short-end interest rate markets have turned more dovish. We had argued back on 2nd November that “hawkish interest rate markets may have got slightly ahead of themselves.”The Federal Reserve and certainly the RBA cooled market expectations of rate hikes while the Bank of England flat-footed markets by leaving its policy rate unchanged at a record-low 0.10%. This was in line with our view that the Fed would “once again put some distance between the start of the QE taper and the start of the rate hiking cycle.”Within developed economies only the RBNZ and Bank of Canada have so far ended their asset purchases and only the Norges Bank and RBNZ have hiked their policy rates (by 25bp each) since the pandemic struck 20 months ago. In comparison 10 out of 21 major EM central banks have hiked their policy rate at least once in the past six months.The spread between the EM and developed economy central bank policy rate, which had narrowed from about 413bp in March 2020 to 360bp last summer, has thus since widened to a 3-year high of 423bp. The pattern was similar following the Great Financial Crisis.Monetary policy tightening is proceeding more slowly in developed economies despite headline CPI-inflation rising to a 13-year high of 3.9% yoy in September while in EM it was stable at 3.3% yoy. EM central banks, at least as a whole, have got a handle on inflation. As a result in developed economies the central bank “real” policy rate collapsed to a multi-decade low of -4.0% at end-September, compared to +0.8% in EM. Excluding India and China the EM central bank real policy rate was still -2.0%, or twice as large as the GDP-weighted real rate in developed economies.This divergence in real policy rates partly explains why EM currencies have outperformed developed currencies since late-April, in our view.If the gap between developed and EM CPI-inflation continues to widen we think developed interest rate markets may once again find it difficult to buy into these central banks’ ultimately dovish thinking and short-end government yields may start to rise again.

Early EM Rate Hikes Supporting EM Currencies

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Technical Analysis

Recent price action shows USD weakness re-emergingThree main USD indices are shared below which suggest that the<ul>
<li>DXY Index should ill fall to 92.84 if not the 92 area</li>
<li>BBDXY Index to 1,148 if not 1,138.</li>
<li>ADXY Index back up towards 110 on breach of 108.38</li>
</ul>

Recent price action shows USD weakness re-emergingThree main USD indices are shared below which suggest that the
DXY Index should ill fall to 92.84 if not the 92 area
BBDXY Index to 1,148 if not 1,138.
ADXY Index back up towards 110 on breach of 108.38


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. 

USD domino decline gaining traction with the Euro above our 1.1610 pivot barrier. USD weakness (DXY 94.50 top call) leading a peak in the 5yr and 10yr yield. USD/JPY next line at the key 114.50 major top barrier.The Euro is the latest currency to make a move. The dollar started its descent in August/September vs commodity currencies and rolled into stronger EM FX and more recently marked tops in the USD/KRW and USD/THB.Yield peak targets outlined that will provide fuel for a weaker USD, stronger metals and a short financials pair versus sectors that benefit from a yield backfill.

USD domino decline gaining traction with the Euro above our 1.1610 pivot barrier. USD weakness (DXY 94.50 top call) leading a peak in the 5yr and 10yr yield. USD/JPY next line at the key 114.50 major top barrier.The Euro is the latest currency to make a move. The dollar started its descent in August/September vs commodity currencies and rolled into stronger EM FX and more recently marked tops in the USD/KRW and USD/THB.Yield peak targets outlined that will provide fuel for a weaker USD, stronger metals and a short financials pair versus sectors that benefit from a yield backfill. 

Our dollar domino top theme is now bleeding into metals strength as the Euro marks a key bull reversal turn.<div>We shorted the USD vs CAD (1.2850), GBP (1.3450) and AUD (0.7190) ahead of the DXY topping call at 94.50 with a bet the Euro would lag a key low which it has. </div><div></div><div>A weaker USD will support our gold and copper long bets (ties in with our A50 breakout/long call).</div><div></div><div>We have a ST yield top in for the US 10yr but remains the bigger input that will drive a mild USD pullback or bigger decline.</div>

Our dollar domino top theme is now bleeding into metals strength as the Euro marks a key bull reversal turn.We shorted the USD vs CAD (1.2850), GBP (1.3450) and AUD (0.7190) ahead of the DXY topping call at 94.50 with a bet the Euro would lag a key low which it has. A weaker USD will support our gold and copper long bets (ties in with our A50 breakout/long call).We have a ST yield top in for the US 10yr but remains the bigger input that will drive a mild USD pullback or bigger decline.

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.

United States

The US dollar is the official currency of the United States of America.

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USD (USD CURNCY)

Early EM Rate Hikes Supporting EM Currencies

EM central banks’ early rate hiking cycle and positive real policy rate has supported EM currencies but developed interest rate markets may have...

Olivier Desbarres

USD Trend Re-Emerging & Asia Positive

The USD is again on the back foot and looks likely to fall. The area where the trend appears strongest is likely to be in Asia

Shyam Devani

Weak Dollar Leading Yield Top

USD domino decline gaining traction with the Euro above our 1.1610 pivot barrier. USD weakness (DXY 94.50 top call) leading a peak in the 5yr and...

Thomas Schroeder

Dollar Decline to Support Metals Rally

Our dollar domino top theme (CAD, GBP, AUD lead) is now bleeding into metals strength as the Euro marks a key bull reversal turn. Bullish copper...

Thomas Schroeder

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

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