QCAM Monthly September 2021 QCAM Insight FX markets were relatively stable over the last month despite increased uncertainties. In our view, the struggle for direction in FX is likely to continue near-term. However, longer-term FX fundamentals are taking shape. Last month we discussed inflation dynamics. This time we take a closer look at current account balances. It is too early... Economy and Interest Rates The spread of the Delta-variant and supply-side bottlenecks have resulted in economic data dis- appointments and higher inflation reports. In our view, these factors are temporary and unlikely to derail the global recovery.... FX [...]
While currency markets struggle to find direction in the near-term, longer-term FX factors are starting to take shape. One is the development of relative inflation performance and the impact on purchasing power parity.
The business cycle is an important exchange rate driver. At QCAM we have been using business surveys for many years to systematically capture the link between business cycles and exchange rate trends.
The USD declined further in May as vaccination and recovery momentum increased in other economies
The USD fell back in April as the rise in US interest rates faded. No strong trend has yet emerged and the balance of strategies leaves a mixed picture.
The USD strengthened in March on the back of improved economic sentiment and rising bond yields. The QCAM FX BIAS product captured the USD rally well.
News over the last month were on balance growth friendly and lifted risky assets but inflation concerns also raised bond yields.
QCAM Insight After the selloff in 2020, the USD started firmer in 2021 amid increased financial market volatility. Several factors support the USD at the moment but it is unclear whether this is a temporary correction or the start of a prolonged period of USD strength as in 2018.
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 business cycle is an important exchange rate driver. At QCAM we have been using business surveys for many years to systematically capture the link between business cycles and exchange rate trends. This rule-based approach is now available as a total return alpha strategy via a UBS certificate. QCAM FX BIAS is diversified over 8 major currencies and delivers attractive returns at moderate volatility