Daily BriefsMacro

Macro: Malaysia: Growing Despair As Covid-19 Crisis Spirals Out of Control and more

In today’s briefing:

  • Malaysia: Growing Despair As Covid-19 Crisis Spirals Out of Control
  • BoE: How to Unwind QE Concerns
  • FX Dashboard: Stay Bullish on the Chilean Peso

Malaysia: Growing Despair As Covid-19 Crisis Spirals Out of Control

By Manu Bhaskaran

Malaysian tensions will come to a head this week when Parliament is called into session. A change of government is possible as is a more fundamental political realignment amid bubbling resentment on the ground over the government’s mis-management of the response to the pandemic.


BoE: How to Unwind QE Concerns

By Phil Rush

  • The BoE has become more concerned about the size of its gilt holdings reducing future policy options: there is less to buy and more uncomfortable fiscal-monetary linkages.
  • Balance sheet problems can unwind by swapping the BoE’s gilt portfolio for T-Bills with the Debt Management Account. Undesirable linkages would break immediately as monetary and issuance functions are strengthened in their natural institutions.
  • Recycling these swapped gilts to the market instead of new gilt issuance would entirely normalise monetary policy space, intra-public sector linkages, and the tradeable free float by 2025-26. The BoE needs to innovate in its ongoing review of this, in our view.

FX Dashboard: Stay Bullish on the Chilean Peso

By Gautam Jain, PhD, CFA

The Chilean peso has given up its outperformance from earlier this year following the central bank’s dovish hike. We remain constructive on the currency on the back of the market-friendly outcome of the presidential primaries last weekend, upward revisions to Chile’s growth, the outlook for copper prices, and the possibility that the central bank raises rates faster than currently priced.

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.


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