Founder

Olivier Desbarres

Exacting. Excellent. Exceeding. Exemplary.

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.

FX & Rates

Treasury Secretary Yellen’s comments ten days ago were merely a temporary distraction. Perhaps more surprisingly, at first glance, the release on Wednesday of a much larger-than-expected increase in US CPI-inflation in April has not had much “sticking power”.Core CPI-inflation almost doubled to 3.0% yoy (the high since December 1995) and as a result the Federal Reserve’s “real core” policy rate fell to a multi-decade low of -2.8%. The range-bound 10-year Treasury yield subsequently closed 7bp higher at a 5-week high of 1.69%. The S&amp;P 500 sell-off (-2.1%) and Dollar NEER rally (+0.6%) recorded on 12th May were both the largest since 25th February. However this spike in volatility was modest in the greater scheme of things. More poignantly, these far from dramatic moves have been largely reversed in the past 48 hours. The Dollar NEER is back to within striking distance of the 3-year low recorded on 10th May, in line with our bearish Dollar view. Markets are still only pricing in 15bp of rate hikes by end-2022, versus pricing of 12bp of hikes pre Wednesday’s release of US CPI-inflation data.Markets, rightly in our view, are still not fully convinced that the Federal Reserve will signal, let alone deliver, a tightening of US monetary policy in coming months. The Federal Reserve after all has form, having kept its “real core” policy rate firmly in the red in 2012-2015 (it averaged -1.7%) despite annualised GDP growth averaging a decent 2.2% qoq. By comparison the Federal Reserve’s “real core” policy rate averaged -1.4% between Q2 2020 and Q1 2021 despite GDP growth having averaged only 1.1% qoq. At the very least markets still seemingly have appetite to be long US equities and short Dollars. While not insensitive to valuations and the risk posed by further upside inflation surprises we remain bearish the Dollar near-term.Finally, while much of the debate about Covid-19, vaccination, the re-opening of economies and the bogeyman of inflation has centred on what will happen in 2021, more attention needs to be paid to 2022, in our view.

Treasury Secretary Yellen’s comments ten days ago were merely a temporary distraction. Perhaps more surprisingly, at first glance, the release on Wednesday of a much larger-than-expected increase in US CPI-inflation in April has not had much “sticking power”.Core CPI-inflation almost doubled to 3.0% yoy (the high since December 1995) and as a result the Federal Reserve’s “real core” policy rate fell to a multi-decade low of -2.8%. The range-bound 10-year Treasury yield subsequently closed 7bp higher at a 5-week high of 1.69%. The S&amp;P 500 sell-off (-2.1%) and Dollar NEER rally (+0.6%) recorded on 12th May were both the largest since 25th February. However this spike in volatility was modest in the greater scheme of things. More poignantly, these far from dramatic moves have been largely reversed in the past 48 hours. The Dollar NEER is back to within striking distance of the 3-year low recorded on 10th May, in line with our bearish Dollar view. Markets are still only pricing in 15bp of rate hikes by end-2022, versus pricing of 12bp of hikes pre Wednesday’s release of US CPI-inflation data.Markets, rightly in our view, are still not fully convinced that the Federal Reserve will signal, let alone deliver, a tightening of US monetary policy in coming months. The Federal Reserve after all has form, having kept its “real core” policy rate firmly in the red in 2012-2015 (it averaged -1.7%) despite annualised GDP growth averaging a decent 2.2% qoq. By comparison the Federal Reserve’s “real core” policy rate averaged -1.4% between Q2 2020 and Q1 2021 despite GDP growth having averaged only 1.1% qoq. At the very least markets still seemingly have appetite to be long US equities and short Dollars. While not insensitive to valuations and the risk posed by further upside inflation surprises we remain bearish the Dollar near-term.Finally, while much of the debate about Covid-19, vaccination, the re-opening of economies and the bogeyman of inflation has centred on what will happen in 2021, more attention needs to be paid to 2022, in our view. 

US Markets Playing Along to Fed Tune…for Now

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

In this note, we argue that as volatility spills over from rising US yields, it may be better to hedge a broad EM currency exposure with the euro rather than reducing it.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

In this note, we argue that as volatility spills over from rising US yields, it may be better to hedge a broad EM currency exposure with the euro rather than reducing it.Separately, the attached file is a snapshot of the EM currency market in which 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 an EM currency index.

FX Dashboard: Hedge EM Currencies with Euro as Volatility Rises

In this note, we highlight the widening performance gap between commodities and EM currencies along with going over the reasons behind it and the timing when it can start reversing.Separately, the attached file is a snapshot of the EM currency market in which 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.

In this note, we highlight the widening performance gap between commodities and EM currencies along with going over the reasons behind it and the timing when it can start reversing.Separately, the attached file is a snapshot of the EM currency market in which 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.

FX Dashboard: Divergence Between Commodities and EM Currencies Grows

In this note, we discuss the rise in volatility for Latin American currencies especially relative to their carry. The low carry relative to the volatility puts the accommodative monetary policies in Peru and Colombia at risk in our view.Separately, 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.

In this note, we discuss the rise in volatility for Latin American currencies especially relative to their carry. The low carry relative to the volatility puts the accommodative monetary policies in Peru and Colombia at risk in our view.Separately, 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.

FX Dashboard: High Volatility Relative to Carry Weighing on LatAm Currencies

In this note, we discuss the underperformance of the Colombian peso due to fiscal concerns potentially leading to a risk of credit rating downgrades. It may become a buying opportunity once one of the rating agencies downgrades the country.Separately, 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.

In this note, we discuss the underperformance of the Colombian peso due to fiscal concerns potentially leading to a risk of credit rating downgrades. It may become a buying opportunity once one of the rating agencies downgrades the country.Separately, 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.

FX Dashboard: Monitor Colombian Peso for an Entry Point

United States

The U.S. Dollar Index(USDX) indicates the general int'l value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. The ICE US computes this by using the rates supplied by some 500 banks. FOR REAL TIME SEE EIS ICEA<GO>.

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Dollar Index (DXY CURNCY)

US Markets Playing Along to Fed Tune…for Now

Markets shaken but not stirred by US inflation surprise in April. Fed "real" policy rate not that low relative to history and US growth. We...

Olivier Desbarres

FX Dashboard: Hedge EM Currencies with Euro as Volatility Rises

In this note, we argue that as volatility spills over from rising US yields, it may be better to hedge a broad EM currency exposure with the euro...

Gautam Jain, PhD, CFA

FX Dashboard: Divergence Between Commodities and EM Currencies Grows

In this note, we highlight the widening performance gap between commodities and EM currencies along with going over the reasons behind it and the...

Gautam Jain, PhD, CFA

FX Dashboard: High Volatility Relative to Carry Weighing on LatAm Currencies

The volatility of LatAm currencies has risen especially relative to their carry. The low carry relative to the volatility puts the accommodative...

Gautam Jain, PhD, CFA

FX Dashboard: Monitor Colombian Peso for an Entry Point

We discuss the underperformance of the Colombian peso due to the risk of credit rating downgrades. It may become a buying opportunity once one of...

Gautam Jain, PhD, CFA

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