The Return of Safe Assets
Supply of highly rated “safe” assets has stabilised and official sector demand is in decline, consistent with falling FX reserves.
Forex
Brexit: Breaking up is never easy, or cheap
The increased uncertainty around the referendum is likely to cause financial and economic volatility and negatively impact growth in the short term. Consequently, the timing and path of rate hikes may also…
Forex markets, after EBC eyes on the FED
We have revised some of our EM projections lower (COP, MXN, RUB and ZAR) as our risk-bearish FX trading strategy is paying larger dividends than we anticipated early in the year. Leaving short-term relief rallies aside, we expect the EM and commodity-currency block to remain weak. This trading strategy is built on the Fed’s reaction function and Asian data. Next week’s Fed meeting will be the key event. Risky assets are for sale in markets, volatility is high and there are risks that global economic weakness will spill further into the US economy. With only one rate hike priced in for this year, the Fed may find communication difficult without signalling a disappointing ‘one and done’ approach.
Comments on ECB meeting and global fixed income themes
2016 has, so far, been a volatile and tumultuous year for financial markets. Only three weeks in, we have already seen a multitude of news events causing risk aversion to spike. These include, to name just a few, the tumbling price of oil, a myriad of different policy moves from the Chinese authorities, conflicting indicators of Chinese economic growth and subsequent fears of slower global growth, yet more idiosyncratic corporate events and geopolitical events.