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Reflation and its risks

  • 07.01.2021
  • FX Monthly

QCAM Insight

The deployment of Corona vaccines is widely expected to reflate the global economy in 2021. The big risk is that the vaccination campaign disappoints. The other concern is that reflation will boost inflation and central banks will be reluctant to tighten policy. Global reflation is widely seen as USD negative. Thus, vaccination failing to deliver the expected results could be USD positive.

Economy and Interest Rates

First-quarter growth is depressed by the rise in Corona infections in Europe and the US. However, manufacturing activity is holding up well and the outlook improves in the second quarter with the expected wide-spread deployment of Corona vaccines.

FX Markets

The USD depreciated further versus all major currencies over the last months on continued positive risk sentiment. Safe-haven currencies like the CHF and the JPY performed well, but the GBP lagged a bit behind since the closure of the EU-UK trade deal.

FX Analytics

Going into more detail: Based on our proprietary analytical framework to take scalable exchange rate positions we are taking a close look on individual currency pairs.

Download: QCAM MONTHLY January 2021

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