Managing FX exposure confronts corporates with challenges and opportunities. Starting from a general discussion of hedging strategies, this article focuses on QCAM’s Dynamic Forward Hedging approach, which offers corporates a flexible hedging strategy and opportunities to improve their overall financial performance.
Powerful headwinds stalled the USD’s rally in October. Cross currents are likely to keep FX markets range-bound in the near term, but with a USD-bullish bias. The tides are set to change if US economic outperformance fades next year, the global economy starts to re-accelerate and the BoJ finally catches up with reality.
The USD continued its rally in September and the momentum as well as the support from superior growth and interest rate run-rates point to further USD upside. Rising risk aversion also supports the USD and is unlikely to reverse as abruptly as it did at the end of last year. However, the risk is that the financial tightening becomes....
QCAM Monthly July 2023: After the strong trends in 2021 and 2022, FX markets were less directional and more dispersed in the first half of 2023. This pattern may well continue in the second half of this year although the underlying drivers are likely to shift. In our view, the dominant theme will...
QCAM Monthly June 2023: Uncertainty surrounding the US debt ceiling has been removed. The focus is back to growth, inflation and monetary policy. The USD bear trend is fading with the global recovery theme. However, the situation is more mixed than it was a year ago and the USD is less likely to outperform across the board. The JPY has the best precondition to shine, while the EUR is more likely to struggle and the USD sits somewhere in-between...
Currency markets have been relatively stable despite the emergence of several uncertainties and market jitters. Most likely, stress is not yet sufficiently high to move markets, which remain focused on central bank actions. This could change with the unfolding of the US debt-ceiling process. Beyond that, recession is becoming a...
QCAM Monthly April 2023 QCAM Special Liquidity deserves a new look given the recent rise in interest rates. In the short-term, holding liquidity is a safe and attractive hedge against prevailing uncertainties, especially the risk of a hard landing. Longer-term, we believe that cash will again produce positive real returns as central banks will be leaning more against inflation. QCAM Insight The banking turmoil in March has failed to trigger a flight-to-quality rally in the USD. This has several reasons, notably the swift policy response that calmed markets and a significant down-shift in Fed terminal rate pricing. In [...]
QCAM Monthly March 2023 QCAM Insight The USD staged a solid rebound in February on the back of firmer activity and inflation data and higher Fed terminal rate pricing. In our view, the US data surprises highlight some of the risks for the outlook but don’t reflect a new trend. In particular, we do not see a return to the dynamics of 2022. We believe that... Economy and Interest Rates Economic data at the start of the year was stronger, leading to further positive growth revisions. Business sentiment is starting to improve and consumer confidence continues to recover. [...]
QCAM Monthly February 2023 QCAM Insight The USD continued to decline in January, but less strongly and evenly as in December. Fading global growth uncertainties, falling risk aversion and the Fed likely to pause the tightening first still point to more USD downside. However,... Economy and Interest Rates Growth forecasts for 2023 are being revised up on the back of better economic reports. Business sentiment is stabilizing and consumer confidence is recovering, albeit from a low level. The Euro-area continues to surprise on the upside, while the US... FX Markets The USD continued to slide lower in January [...]
QCAM Monthly January 2023 QCAM Insight The USD is down nearly 10% since the peak in late September. The key drivers of the shift were the expected pivot in Fed policy and a broad decline in global risk aversion. The latest data supports the market’s view of an economic soft landing. Thus, the USD,... Economy and Interest Rates Economic activity at the end of last year was firmer, business sentiment is stabilizing, and consumer confidence is recovering, albeit from a low level. The Euro-area surprised on the upside, while the US... FX Markets The USD continued to slide [...]
