FX hedging and interest rate spreads – the ultra-cheap days are over. The monetary policy conversion towards zero interest rates has led to an unprecedented compression of cross-country interest rate differentials. The departure from this ultra-low spread environment began in 2015. Was can be expected this year?
The macro perspective
Inflation rise leads to cries of ‘Horror-Kurve’. Inflation rose broadly in December, but in Germany it soared, with energy prices as the main driver. What actions can be expected from the ECB?
FX market talk
The renminbi peg – China plays for time. China’s monetary policy focuses on growth, not on maintaining the exchange rate regime. This clear priority actually undermines the renminbi’s fixed rate and could ultimately lead to its undoing. What are China’s options?