Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In this note, we discuss the underperformance of the Russian ruble (RUB) and the Colombian peso (COP) relative to the rally in oil prices.The attached file is a snapshot of EM currency market, which we produce daily, and where we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to the broad market. The analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we discuss the underperformance of the Russian ruble (RUB) and the Colombian peso (COP) relative to the rally in oil prices.The attached file is a snapshot of EM currency market, which we produce daily, and where we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to the broad market. The analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we look at how the intra-regional correlations among EM currencies have evolved and their implications.The attached file is a snapshot of EM currency market, which we produce daily, and where we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to the broad market. The analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we look at how the intra-regional correlations among EM currencies have evolved and their implications.The attached file is a snapshot of EM currency market, which we produce daily, and where we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to the broad market. The analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

FX Dashboard: Digging Deeper into Intra-Regional Correlations

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Olivier Desbarres

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4X Global Research

4X Global Research was founded in 2017 to provide institutional and corporate clients with the substantive research, high-quality analysis and thoughtful insight on Emerging and G20 economies and financial markets they need to make informed and timely decisions and gain an edge in their investments.

The US Dollar NEER has since 12th February appreciated about 2.3% to a 4-month high and its inverse correlation with the S&amp;P 500 (-4.2%) has re-established itself. This is in line with our forecast that the Dollar’s sell-off in early February was “a small, short-term correction” rather than “another prolonged downtrend”. If anything we were not bullish enough.We are also sticking with our view “that material Dollar depreciation may not resume for another couple of months, until it becomes clearer that a matrix of loose US fiscal policy but still low US interest rates will dent the Dollar’s attractiveness”. At the same time we think the slow start of the vaccination process in many major developed and EM economies could delay a meaningful rebound in global confidence and GDP growth and continue to act as a brake for emerging market currencies as a whole. Macro data indeed point to still weak global growth in early 2021, in our view. However, the significant build-up of private sector savings in developed economies offers the prospect of pent-up demand being unleashed once vaccination programs have matured and governments have materially eased domestic lockdown measures. Moreover, US economic activity – as measured by income and consumption – recovered in January-February, albeit from a low base, thanks in part to fiscal stimulus measures, a strengthening of the labour market and reasonably loose social distancing measures. It is early days but so far financial markets’ reaction to British Chancellor of the Exchequer Sunak’s UK Budget announcement on 3rd March 2021 has been pretty tepid. This is in line with recent years’ budgets, with Sterling, the FTSE 100 and UK Gilts moving little on budget day and in subsequent trading sessions, and in line with our forecast that this year’s “two-pronged transitional” budget would be no different.We maintain our view that policies largely outside of the Chancellor’s remit – particularly the relative pace of vaccination in the United Kingdom and by extension the likely timeline for a relaxation of still stringent lockdown measures and recovery in domestic economic growth – will continue to drive domestic financial markets, including Sterling.

The US Dollar NEER has since 12th February appreciated about 2.3% to a 4-month high and its inverse correlation with the S&amp;P 500 (-4.2%) has re-established itself. This is in line with our forecast that the Dollar’s sell-off in early February was “a small, short-term correction” rather than “another prolonged downtrend”. If anything we were not bullish enough.We are also sticking with our view “that material Dollar depreciation may not resume for another couple of months, until it becomes clearer that a matrix of loose US fiscal policy but still low US interest rates will dent the Dollar’s attractiveness”. At the same time we think the slow start of the vaccination process in many major developed and EM economies could delay a meaningful rebound in global confidence and GDP growth and continue to act as a brake for emerging market currencies as a whole. Macro data indeed point to still weak global growth in early 2021, in our view. However, the significant build-up of private sector savings in developed economies offers the prospect of pent-up demand being unleashed once vaccination programs have matured and governments have materially eased domestic lockdown measures. Moreover, US economic activity – as measured by income and consumption – recovered in January-February, albeit from a low base, thanks in part to fiscal stimulus measures, a strengthening of the labour market and reasonably loose social distancing measures. It is early days but so far financial markets’ reaction to British Chancellor of the Exchequer Sunak’s UK Budget announcement on 3rd March 2021 has been pretty tepid. This is in line with recent years’ budgets, with Sterling, the FTSE 100 and UK Gilts moving little on budget day and in subsequent trading sessions, and in line with our forecast that this year’s “two-pronged transitional” budget would be no different.We maintain our view that policies largely outside of the Chancellor’s remit – particularly the relative pace of vaccination in the United Kingdom and by extension the likely timeline for a relaxation of still stringent lockdown measures and recovery in domestic economic growth – will continue to drive domestic financial markets, including Sterling.

In this note, we examine the rise in cross-correlations among EM currencies and its implications for the asset class.The attached file is a snapshot of EM currency market, which we produce daily, and where we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to the broad market. The analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we examine the rise in cross-correlations among EM currencies and its implications for the asset class.The attached file is a snapshot of EM currency market, which we produce daily, and where we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to the broad market. The analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

FX Dashboard: Rising Correlations Add to Overall Volatility

In this note, we reiterate our recommendation to be long the Polish zloty (PLN) against the Czech koruna (CZK), as the former has underperformed.The attached file is a snapshot of EM currency market, which we produce daily, and where we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to the broad market. The analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

In this note, we reiterate our recommendation to be long the Polish zloty (PLN) against the Czech koruna (CZK), as the former has underperformed.The attached file is a snapshot of EM currency market, which we produce daily, and where we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to the broad market. The analysis, therefore, is not a forecasting tool but to be used for identifying dislocations, which we loosely define as price moves that cannot be justified by fundamentals.

FX Dashboard: Polish Zloty Underperformance Looks Overdone

United Kingdom

The British Pound Sterling is the official currency of The United Kingdom. 

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FX Dashboard: Oil Currencies Vs Oil

Attached is our daily FX Dashboard that helps identify dislocations among EM currencies. In this note, we discuss the underperformance of Russian...

Gautam Jain, PhD, CFA

FX Dashboard: Digging Deeper into Intra-Regional Correlations

Attached is our daily FX Dashboard that helps identify dislocations among EM currencies. In this note, we look at the evolution of intra-regional...

Gautam Jain, PhD, CFA

US and UK: The Comeback Kids

Dollar has defied bearish expectations and US economy has rebounded while Sterling and UK financial markets beating to drum of vaccination program...

Olivier Desbarres

FX Dashboard: Rising Correlations Add to Overall Volatility

Attached is our daily FX Dashboard that helps identify dislocations among EM currencies. In this note, we discuss the implications of the rise in...

Gautam Jain, PhD, CFA

FX Dashboard: Polish Zloty Underperformance Looks Overdone

Attached is our daily FX Dashboard that helps identify dislocations among EM currencies. In this note, we reiterate our recommendation to be long...

Gautam Jain, PhD, CFA

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