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Stay up to date on the latest thoughts from our Currency Management Group.

A possible change in Chinese currency policy?

By GFICC Investors
The weakness in the renminbi since the escalation of trade tensions earlier this year has come in contrast to a narrowing in interest rate differentials versus the US dollar.
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Why is the potential for US currency intervention a topic of interest?

By GFICC Investors
The potential for unilateral US intervention in the currency markets to weaken the US dollar is increasing as the US administration becomes more frustrated with the dollar’s persistent strength.
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Will the dollar continue to underperform?

By GFICC Investors
We expect the US dollar to underperform ahead of the first Federal Reserve (the Fed) interest rate cut of this cycle. However, if US rate cuts prove to be mid-cycle rather than recessionary, July could mark the end of the dollar’s relative underperformance.
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Stability masks rising risks in currency markets

By GFICC Investors
Major currencies have been as stable as at any time in the past few decades. The range from high to low in the EURUSD exchange rate over the last six months, for example, has been only 4%, which is nearly a third of the average range since 2000. The options market expects the current tranquility to continue, with implied volatility for the next three months over a third lower than its average over the last five years and close to all-time lows. We believe this serenity masks rising underlying tensions that could eventually spark larger moves in currency markets.
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Sell in May and go away?

By GFICC Investors
The strong performance of risk assets year-to-date has increased focus on the potential returns from a "sell in May and go away" strategy. We explain why such an approach may not be warranted this year for investors in emerging market currencies.
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Euro: No longer floored but flawed?

By GFICC Investors
Our view over the past few quarters has been that EURUSD should be rangebound, as the cyclical outperformance of the US economy is offset by the eurozone’s relatively better balance of payments position. Central bank reserve diversification flows have also provided another medium-term hurdle for the US dollar.
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What's holding back the Canadian dollar?

By GFICC Investors
Unusually, and despite the currency generally being regarded as cheap, the Canadian dollar has weakened throughout the Bank of Canada’s hiking cycle over the last two years. With economic growth stalling towards the end of 2018 and the Bank of Canada adopting a more balanced outlook, questions are re-emerging about the outlook for the currency over the medium term.
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How expensive is the Swiss Franc? 

By GFICC Investors
Switzerland is well known around the world for its high prices, with a Big Mac or a Starbucks latte costing over USD 6 each. The Swiss National Bank (SNB) itself describes the Swiss franc as “highly valued”, but it is less clear to us that the currency is significantly overvalued.
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EUR/USD: Stuck in a rut?

By GFICC Investors
For most of 2018, eurozone and US monetary policy appeared to be on a largely preset course. The European Central Bank (ECB) suggested that its quantitative easing programme was likely to cease at the end of 2018, with rate increases to follow in the late summer of 2019. The Federal Reserve was happy, meanwhile, to continue with gradual, once-per-quarter rate hikes.
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Sterling in the context of Brexit

By GFICC Investors
Brexit uncertainty continues to dominate the outlook for sterling, but most likely paths eventually (with some volatility) lead to relatively soft Brexit outcomes.
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Is there a line in the sand for the Chinese renminbi?

By GFICC Investors
Since the end of March this year, market sentiment towards the Chinese currency has shifted significantly, coinciding with the steady divergence in cyclical positions and the escalating trade dispute between US and China. The renminbi’s underperformance against its major trade partners has been seen by investors as a natural adjustment mechanism, reflecting the People’s Bank of China’s (PBOC’s) more accommodative stance in response to economic stresses. However, the PBOC’s policy reaction function when faced with a USD/CNY parity breaching above 7.0 remains subject to uncertainty.
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Why has the dollar diverged from rate spreads?

By GFICC Investors
Towards the end of 2017 and through January 2018, the performance of the US dollar significantly diverged from relative rate spreads. In January, US yields rose 14 basis points relative to other G9 equivalents, while the US dollar fell almost 6%. This divergent performance was unusual when viewed from a historical perspective, but has reoccurred again, albeit to a lesser extent, in recent weeks.
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