XAU remains the ultimate risk aversion/currency debasement hedge and should continue to shine especially once the Fed starts to cut rates in H224.
While we do not doubt that the risks the RBNZ may have to hike further are significant, we think the RBNZ is being overly hawkish. Slowing global growth and the new NZ conservative government cutting spending will weigh on growth and inflation.
After a 2Y downtrend, AUD/USD looks as though it is turning the corner. The AUD-USD short-term rates differential has bottomed out. Our US economist forecasts that the Fed will begin cutting rates in Q324. The US will experience only a mild recession. Meanwhile, Australian inflation is proving more resilient. Australia’s policy rate is less restrictive than other...
USD/CAD’s narrow range-trading pattern could be here to stay, while we expect the pair to lean towards challenging its lower bound this year. Stretched CAD shorts have been unwound, while money markets’ pricing comes a bit at odds with past easing experiences when the BoC moved later than the Fed and in a less aggressive way.
Investors have been reassessing their excessive dovish Fed outlook since the start of 2024. This, coupled with some positive US data surprises, has helped the USD recover more recently. As a result, the currency no longer looks that oversold and we have adopted a more neutral tactical outlook from here. We also think that the approaching start of the Fed easing...
The CHF outperformed all its G10 FX peers in 2023, thanks in large part to the SNB’s interventions. Yet on that front, the bank tweaked its stance at its December meeting, while acknowledging reduced risks of inflation overshoot. We are thus at best neutral on the CHF for 2024, while still mindful of any eventual return of market jitters, while we expect the CHF...
Persistent US inflation due to sticky services inflation could mean the Fed has to hold off cutting rates until Q324 and then by only 50bp in 2024. Japan still faces structurally low inflation due to high corporate savings; the BoJ is not expected to hike rates in 2024. With the Fed and BoJ likely to disappoint investors, USD/JPY could rally nearterm. Fed rate...
In 2024, the GBP could benefit from the convergence between (1) the still-weak UK economic outlook and (2) the Eurozone – in particular the US economy. In addition, the UK economy could benefit if the opposition Labour Party comes back to power after the general election later this year to pursue a policy of ‘gradual rapprochement’ with the EU and thus dismantle...
The EUR/USD rebound went into reverse at the start of 2024, and we expect further underperformance of the pair from current levels in the coming months. We think the mix of currency drivers would be more negative for the pair in 2024, pushing EUR/USD back towards 1.05 in 12M. EUR/USD should continue to follow the relative policy outlook between the ECB and the Fed...
USD shorts reduce to a score of -9 (+/−50 scale) from -15 last week, as sentiment worsens across other G10 currencies as well as Latam and CEEMEA FX. Our proxy for electronic trading venues builds longs while real money investors continue to reduce shorts. GBP longs reduce to +28 from +36 last week, as our proxy for real money investors reduces longs while...
Spot is pivoting around the 1.26 point still. Short-term price action looks a little soft but the weekly pattern of trade is shaping up a little more constructively for the GBP, with a solid rebound from the early week low putting a potential bull “hammer” signal on the weekly chart (contingent on a high close for the GBP today). Medium-term support at 1.2500/20...
Price signals look mixed across the intraday, daily and weekly charts. The short-term pattern of trade suggests the EUR’s rebound from the early week low has stalled but there are some more positive signals on the daily and weekly charts that might indicate the EUR is trying to base in a more sustainable way—a high close on the week for the EUR would be a...
The CAD is trading flat on the session and short-term trend signals are weak, supporting the outlook for more range trading in the near term. But the weekly chart—at the moment—reflects another firm rejection of the 1.3540/50 peaks seen in January and a weak close for funds on the day should see spot prices have a run at last week’s low around 1.3360 in the week...
We have been constructive on the USD since the start of the year, arguing that FX investors were too bearish on the currency because: (1) they were too dovish on the Fed especially relative to central banks like the ECB; (2) they were too bearish on the US economic outlook relative to the European and Asian outlook; and (3) they seemed to ignore the exceptional...
A week after the US, Statistics Canada is due to release its January labour report today. While the bar has been put quite high to come just close to last month’s stellar jobs gains in the US, attention could actually focus more on another part of the report: wages growth. Canada has indeed come at odds with the US on that front, as Canadian wages have just...
The CHF has underperformed other FX majors this month, as the extended rebound in DM rates has taken its toll on the low-yielder. This reversal should be welcomed by the SNB which shifted away from its inclination for FX sales in its rhetoric at its December meeting, while the CHF had gone into 2024 on its strongest footing since 2015 on a real trade-weighted...
NZ’s labour market data surprised the market and us to the upside. While labour market tightness is easing with the unemployment rate ticking up to 4% and private sector wages growth slowing further, this is happening slower than the RBNZ would like. The central bank had been looking for a rise in the unemployment rate to 4.2%. This will leave the central bank...
We are closing our long EURSEK trade at 11 2724 for a small loss of 0 44 USD 44 k We initially added the trade to position for a more dovish Riksbank and the end of the reserve hedging programme. However, even though these factors have played out and the USD has gained strength, the trade has failed to perform On fundamentals, we continue to view risks around...