The USD continued its recovery in March after a short break in February. We think the USD will on balance remain firm, but we also expect more divergence given the cross current of policy and business cycle dynamics. In particular, we think the ECB will cut interest rates earlier and more than the Fed, hurting the EUR, but we also expect that a broadening global recovery will lift commodity prices and risk sentiment, supporting currencies such as the AUD.
The USD continued to rally in the first half of February but has been gradually sliding lower since then. The competing themes are global recovery versus US exceptionalism and a hawkish Fed. There are many other uncertainties that could shape the direction for FX markets but we expect that data releases over the first half of the year will determine which of the two main dynamics will come to dominate.
The USD is recovering as the market pairs back Fed rate cut expectations. Meanwhile, the US election campaign is gearing up with a Biden-Trump rematch looking most likely. The outcome of the election remains uncertain and there are many moving parts that can impact the USD in response. ...
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 [...]
