Stay up to date on the latest thoughts from our Currency Management Group
The Federal Reserve has been shifting its stance over recent months in response to a labour market showing signs of reaching ‘full’ employment along with uncomfortably high levels of inflation.
Over the last few months markets have priced significant additional policy tightening from global central banks in response to a widespread acceleration in inflation. This phenomenon has been global in nature, catalysed by changes in outlook and policy from smaller central banks but also affecting the largest markets.
The increased level of interest rate volatility in the currency swap market has received considerable attention from market participants.
A couple of key trends in capital flows suggest the role of euro funding is growing, and we outline the near-term implications for currency markets.
Despite the Swiss National Bank (SNB) continued to characterise the Swiss franc as highly valued, we suggest that any overvaluation may be illusory.
Since the start of 2013, consensus forecasts for the Swedish krona and Norwegian krone have been persistently bullish and persistently wrong.
With current general election polling consistent with a victory for the Conservative Party, the pound has outperformed over the last few months.
Our currency team provides solutions for clients, controlling risk using passive management strategies and generating returns by actively managing global currencies.
We believe the US dollar is currently experiencing a rare structural change in valuation level that means it may be far less overvalued than is widely believed.
We believe a well-designed, tailored approach to using ESG factors for active currency management can be a source of added value for clients over the long term.
The probability of US unilateral intervention has risen from a tail scenario to one of low-to-moderate probability.
How the dollar trades following the cut in rates, depends to a large extent on whether the rate cuts are mid cycle or recessionary.