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

The prevailing market view, as depicted in a recent <a href="https://uk.investing.com/news/economic-indicators/exclusive-china-comfortable-with-yuan-rises-for-now-as-economy-recovers-sources-say-2261648" target="_blank" rel="noopener">Reuters</a> article, is seemingly that Chinese policy makers are happy to allow further Renminbi appreciation versus the Dollar driven by a rising domestic trade surplus and strong capital account inflows.The Renminbi has indeed appreciated 2.2% versus the Dollar since our last report on 22nd October <a href="https://www.smartkarma.com/insights/pboc-likely-to-keep-renminbi-on-tight-leash" target="_blank" rel="noopener">(PBoC likely to keep Renminbi on tight leash</a>), with the USD/CNY cross currently trading near its lowest level since mid-2018. However, the US accounts for only about 20% of Chinese trade in goods. The Renminbi Nominal Effective Exchange Rate is thus a far more accurate measure of overall Chinese export competitiveness and of the currency’s potential (dis)inflationary impact.The Renminbi NEER slowly appreciated further in the run-up to the US elections on 3rd November but has since then depreciated about 0.9%, with the Renminbi underperforming many major currencies including the Euro and Korean Won. The Renminbi NEER is currently trading at the same level as it was on 22nd October, in line with our forecast that “near-term the PBoC is more likely in a first instance to slow the pace of Renminbi appreciation and ultimately arrest the currency’s climb”. The Renminbi has weakened recently despite evidence of strong balance of payments inflows, including a record trade surplus of $74.4bn in November and a 11.8% yoy increase in FDI inflows, and data pointing to seasonal Renminbi strength in the month of November.Price action in the past seven weeks suggests to us that the People’s Bank of China has been fixing the daily USD/CNY central parity rate slightly higher than implied by underlying market forces, allowing modest Renminbi NEER depreciation mainly to put a floor under Chinese consumer prices flirting with deflation (a view we expressed on 22nd October). Near-term we expect the Renminbi to continue appreciating versus a slowly depreciating Dollar (<a href="https://www.smartkarma.com/insights/emerging-market-currencies-hopes-and-realities" target="_blank" rel="noopener">Emerging Market currencies: Hopes and Realities</a>, 2nd December 2020). However, we think the risk is tilted towards the PBoC further weakening the Renminbi NEER in coming weeks to the levels which prevailed in early September.

The prevailing market view, as depicted in a recent Reuters article, is seemingly that Chinese policy makers are happy to allow further Renminbi appreciation versus the Dollar driven by a rising domestic trade surplus and strong capital account inflows.The Renminbi has indeed appreciated 2.2% versus the Dollar since our last report on 22nd October (PBoC likely to keep Renminbi on tight leash), with the USD/CNY cross currently trading near its lowest level since mid-2018. However, the US accounts for only about 20% of Chinese trade in goods. The Renminbi Nominal Effective Exchange Rate is thus a far more accurate measure of overall Chinese export competitiveness and of the currency’s potential (dis)inflationary impact.The Renminbi NEER slowly appreciated further in the run-up to the US elections on 3rd November but has since then depreciated about 0.9%, with the Renminbi underperforming many major currencies including the Euro and Korean Won. The Renminbi NEER is currently trading at the same level as it was on 22nd October, in line with our forecast that “near-term the PBoC is more likely in a first instance to slow the pace of Renminbi appreciation and ultimately arrest the currency’s climb”. The Renminbi has weakened recently despite evidence of strong balance of payments inflows, including a record trade surplus of $74.4bn in November and a 11.8% yoy increase in FDI inflows, and data pointing to seasonal Renminbi strength in the month of November.Price action in the past seven weeks suggests to us that the People’s Bank of China has been fixing the daily USD/CNY central parity rate slightly higher than implied by underlying market forces, allowing modest Renminbi NEER depreciation mainly to put a floor under Chinese consumer prices flirting with deflation (a view we expressed on 22nd October). Near-term we expect the Renminbi to continue appreciating versus a slowly depreciating Dollar (Emerging Market currencies: Hopes and Realities, 2nd December 2020). However, we think the risk is tilted towards the PBoC further weakening the Renminbi NEER in coming weeks to the levels which prevailed in early September. 

Media coverage of Emerging Market currencies tends to oscillate between the very bearish and very bullish, with little differentiation between low and high-yielding currencies or between regional blocks let alone between the dozens of currencies still referred to, rightly or wrongly, as “emerging”. Price action in 2019 only partially vindicates this approach.News articles about the November EM currency rally and the long list of factors supporting further outperformance next year have been rife.EM currencies, particularly high-yielders, materially outperformed in the fortnight following the US elections thanks in part to a pick-up in portfolio inflows. The prevailing view was/is that a less conflictual Biden presidency will be a net positive for global trade and commodity prices. EM currencies appreciated further following news on 23rd November that the more affordable Astra Zeneca vaccine was up to 90% effective and Trump’s announcement that he would allow the transition of power to President-elect Biden.However, in the past two weeks a GDP-weighted basket of EM currencies (excluding the Chinese Renminbi) has appreciated only 0.9% versus the Dollar and underperformed a basket of developed market currencies (+1.3%). Moreover, high yielding EM currencies (+1.1%) have only marginally outperformed low-yielding EM currencies (+0.7%). Domestic and regional factors over-and-above “global risk appetite” have arguably contributed to the outperformance of Central European and Latam currencies and the more mixed (read subdued) performance of high-yielding EM and Asian currencies. One explanation is that some of these EM currencies are already pricing in a lot of “good” news.The consensus forecast is seemingly that EM currencies will outperform both the Dollar and developed market currencies going forward. The long list of supporting factors includes i) cheap EM valuations, ii) EM currencies’ yield advantage, iii) the benefits to EM of further Dollar depreciation and iv) a rebound in global economic growth. We sympathise with this view, albeit with some important caveats. One is that more interventionist Asian central banks may stop their currencies from fully joining any EM currency party in 2021. Moreover, we would split the next 13 months into three timelines.

Media coverage of Emerging Market currencies tends to oscillate between the very bearish and very bullish, with little differentiation between low and high-yielding currencies or between regional blocks let alone between the dozens of currencies still referred to, rightly or wrongly, as “emerging”. Price action in 2019 only partially vindicates this approach.News articles about the November EM currency rally and the long list of factors supporting further outperformance next year have been rife.EM currencies, particularly high-yielders, materially outperformed in the fortnight following the US elections thanks in part to a pick-up in portfolio inflows. The prevailing view was/is that a less conflictual Biden presidency will be a net positive for global trade and commodity prices. EM currencies appreciated further following news on 23rd November that the more affordable Astra Zeneca vaccine was up to 90% effective and Trump’s announcement that he would allow the transition of power to President-elect Biden.However, in the past two weeks a GDP-weighted basket of EM currencies (excluding the Chinese Renminbi) has appreciated only 0.9% versus the Dollar and underperformed a basket of developed market currencies (+1.3%). Moreover, high yielding EM currencies (+1.1%) have only marginally outperformed low-yielding EM currencies (+0.7%). Domestic and regional factors over-and-above “global risk appetite” have arguably contributed to the outperformance of Central European and Latam currencies and the more mixed (read subdued) performance of high-yielding EM and Asian currencies. One explanation is that some of these EM currencies are already pricing in a lot of “good” news.The consensus forecast is seemingly that EM currencies will outperform both the Dollar and developed market currencies going forward. The long list of supporting factors includes i) cheap EM valuations, ii) EM currencies’ yield advantage, iii) the benefits to EM of further Dollar depreciation and iv) a rebound in global economic growth. We sympathise with this view, albeit with some important caveats. One is that more interventionist Asian central banks may stop their currencies from fully joining any EM currency party in 2021. Moreover, we would split the next 13 months into three timelines.

Emerging Market Currencies: Hopes and Realities

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

<ul>
<li>Our text mining sees a post-election boost in general sentiment on Europe vis-à-vis Biden victory</li>
<li>COVID &amp; mobility differentials remain notably unfavorable for Europe; as expected, our sentiment indicators have deteriorated most for European retail &amp; manufacturing, while European Property remains positive</li>
<li>We recently picked up negative sentiment on the EU Recovery Fund, as multiple EU countries are signaling they are unlikely to tap the 360B EUR low-interest loan portion of the overall 750B EUR stimulus package; but the market may be perceiving this as a sign of resilience</li>
<li>Our EUR/USD lead indicator has also reverted back to neutral in the past week, as the EUR may have been spared from further weakness for the time being</li>
<li>Though we are not seeing multi-STDEV breakouts, our European indicators recognize the early innings of a positive change on the margin as the market digests the strategic and macro implications of a Biden presidency</li>
</ul><div class="content-highlight">TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


Our text mining sees a post-election boost in general sentiment on Europe vis-à-vis Biden victory
COVID &amp; mobility differentials remain notably unfavorable for Europe; as expected, our sentiment indicators have deteriorated most for European retail &amp; manufacturing, while European Property remains positive
We recently picked up negative sentiment on the EU Recovery Fund, as multiple EU countries are signaling they are unlikely to tap the 360B EUR low-interest loan portion of the overall 750B EUR stimulus package; but the market may be perceiving this as a sign of resilience
Our EUR/USD lead indicator has also reverted back to neutral in the past week, as the EUR may have been spared from further weakness for the time being
Though we are not seeing multi-STDEV breakouts, our European indicators recognize the early innings of a positive change on the margin as the market digests the strategic and macro implications of a Biden presidency
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot:  Europe - Biden Era Vs. Macro Headwinds, Early Signs of Positive Change on the Margin

The Dollar has treaded water in the past three months, in line with our benign view that “forecasts of the Dollar’s demise as the world’s number one reserve currency are at best extremely premature, at worst unfounded”.Our fundamental perspective is that a structural shift out of Dollars remains unlikely near-term, regardless of the outcome of the Presidential and Senate elections on 3rd November. One reason is that other major reserve currencies such as the Euro, Sterling and Canadian Dollar – which account for a large share of the Dollar Nominal Effective Exchange Rate (NEER) – face a number of headwinds unlikely to dissipate materially any time soon.Moreover, in the past week the Chinese Renminbi NEER has been broadly unchanged, in line with our forecast that “the People’s Bank of China” is more likely in a first instance to […] ultimately arrest the currency’s climb”.   We acknowledge, however, that the outlook for the Dollar and equities in the days (and potentially weeks) following the US elections is shrouded in multiple levels of uncertainty, which has translated into lower not higher realized volatility. Since February the Dollar’s underlying performance has largely reflected its “safe-haven” status, in our view, with the Dollar NEER inversely correlated with the S&amp;P 500. However, this inverse correlation briefly broke down in June, September and mid-October.Our view is that an over-whelming victory for either candidate on 3rd November is more likely to buoy global risk appetite and thus weigh on the Dollar. Conversely, if the election result remains open-ended for a few days (or longer), uncertainty could weigh on market sentiment and perversely see the Dollar appreciate and market volatility tick up.The Dollar NEER has on average in the past decade been strongest in the month of November (+1.1%), but this is partly skewed by the Dollar’s 2.6% gain in November 2016. Moreover, monthly seasonality has, somewhat unsurprisingly, broken down this year and historical patterns are of little help in ascertaining how the Dollar may trade next month.

The Dollar has treaded water in the past three months, in line with our benign view that “forecasts of the Dollar’s demise as the world’s number one reserve currency are at best extremely premature, at worst unfounded”.Our fundamental perspective is that a structural shift out of Dollars remains unlikely near-term, regardless of the outcome of the Presidential and Senate elections on 3rd November. One reason is that other major reserve currencies such as the Euro, Sterling and Canadian Dollar – which account for a large share of the Dollar Nominal Effective Exchange Rate (NEER) – face a number of headwinds unlikely to dissipate materially any time soon.Moreover, in the past week the Chinese Renminbi NEER has been broadly unchanged, in line with our forecast that “the People’s Bank of China” is more likely in a first instance to […] ultimately arrest the currency’s climb”.   We acknowledge, however, that the outlook for the Dollar and equities in the days (and potentially weeks) following the US elections is shrouded in multiple levels of uncertainty, which has translated into lower not higher realized volatility. Since February the Dollar’s underlying performance has largely reflected its “safe-haven” status, in our view, with the Dollar NEER inversely correlated with the S&amp;P 500. However, this inverse correlation briefly broke down in June, September and mid-October.Our view is that an over-whelming victory for either candidate on 3rd November is more likely to buoy global risk appetite and thus weigh on the Dollar. Conversely, if the election result remains open-ended for a few days (or longer), uncertainty could weigh on market sentiment and perversely see the Dollar appreciate and market volatility tick up.The Dollar NEER has on average in the past decade been strongest in the month of November (+1.1%), but this is partly skewed by the Dollar’s 2.6% gain in November 2016. Moreover, monthly seasonality has, somewhat unsurprisingly, broken down this year and historical patterns are of little help in ascertaining how the Dollar may trade next month.

<ul>
<li>Our text-mined EUR Leading Indicator has recently crossed into negative territory, driven primarily by COVID-19 second wave news and expectations of further ECB easing</li>
<li>While the knee-jerk pushback would be to suggest that the US second wave is equally threatening and the size of potential US stimulus significantly larger, the reality is that Europe-wide COVID-19 cases per million have been exceeding the US equivalent since October 16 (on a 7DMA basis), relative EU mobility has suffered, and US stimulus has been delayed</li>
<li>Despite net short DXY positioning reversing quite sharply, the EUR net long remains oustandingly elevated</li>
<li>We find that general USD-negative expressions in the global financial media have been declining sharply in recent weeks and are now at levels last seen in April</li>
<li>With potentially stale positioning and greater uncertainty in the final stretch ahead of US elections, the giant EUR net long is at risk of being unwound</li>
</ul><div class="content-highlight">TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


Our text-mined EUR Leading Indicator has recently crossed into negative territory, driven primarily by COVID-19 second wave news and expectations of further ECB easing
While the knee-jerk pushback would be to suggest that the US second wave is equally threatening and the size of potential US stimulus significantly larger, the reality is that Europe-wide COVID-19 cases per million have been exceeding the US equivalent since October 16 (on a 7DMA basis), relative EU mobility has suffered, and US stimulus has been delayed
Despite net short DXY positioning reversing quite sharply, the EUR net long remains oustandingly elevated
We find that general USD-negative expressions in the global financial media have been declining sharply in recent weeks and are now at levels last seen in April
With potentially stale positioning and greater uncertainty in the final stretch ahead of US elections, the giant EUR net long is at risk of being unwound
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot: Potential Downside to EUR on Relative COVID Acceleration & Elevated Positioning

United States

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

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Far More to Renminbi than USD/CNY Cross

CNY has appreciated further vs USD since US elections but weakened in NEER terms despite strong BoP inflows into China. PBoC has fixed USD/CNY to...

Olivier Desbarres

Emerging Market Currencies: Hopes and Realities

EM currencies appreciated vs USD and outperformed in fortnight following US elections but since then performance more differentiated. Consensus is...

Olivier Desbarres

TMI Snapshot: Europe - Biden Era Vs. Macro Headwinds, Early Signs of Positive Change on the Margin

Our text mining sees a post-election boost in general sentiment on Europe vis-à-vis Biden victory. Despite daunting macro headwinds, we see early...

Elan Gore

US Dollar – Calm Before the Storm

Sleepy Dollar has done little in the past three months, beating to the inverse tune of US equities. But US presidential and senate elections on 3...

Olivier Desbarres

TMI Snapshot: Potential Downside to EUR on Relative COVID Acceleration & Elevated Positioning

Our text-mined indicators are picking up negative EUR sentiment on alarming relative COVID-19 trends and likely ECB easing. As DXY specs already...

Elan Gore

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