Category Archives:

currencies

A pretty good indicator of USD/EUR exchange rate movements

After four calendar years of price appreciation, it looks like the US dollar will end 2017 deeply in negative territory. The dollar has fallen by almost 12% this year versus the euro and around 8% on a trade weighted basis. More surprisingly, the sharp depreciation of the dollar against the euro has occurred in a period when central bank policy has diverged, resulting in the yield differential …

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The euro and the dollar: rates not driving performance. So what is?

Despite US rate hikes in December, March and another last week, the US dollar has depreciated back to pre-election levels.  All of the Trumpflation dollar premium has disappeared.  As the Trump dollar trade appears to have run out of steam, the Euro has however been climbing. Optimism around the Euro area growth comeback grew leading up to the ECB meeting earlier this month, with EUR/USD hittin…

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Premier League footballers are making currency calls, like rappers and models in 2007. Are they right to avoid GBP?

According to recent reports, leading foreign football players in the English Premier League are looking to get paid in euro rather than sterling. Since the UK referendum result in June last year, sterling has fallen by 12% against the euro, so it is unsurprising to see that some players have questioned the denomination of their salaries. It is not the first time that global stars have asked to …

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The Israeli Shekel: Flying under the radar

Though the recent US Treasury report did not name any country as a currency manipulator (see more details on this in Mario’s blog), the monitoring list centres on larger economies that meet the following criteria:

  1. The country has a significant bilateral trade surplus with the United States defined as more than USD 20 billion.
  2. The country has a current account surplus of at least 3% of GDP and …

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The US has not labelled Switzerland a currency manipulator, yet

Switzerland has made headlines of late as a potential candidate to be labelled a currency manipulator by the U.S. Treasury. For those countries at risk, a report recently published by the U.S Treasury sets out three key criteria the U.S. Treasury will use in order to assess whether a country is “pursuing unfair practices”. Firstly, the country would have a significant bilateral trade surplus wi…

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Czech out: Thoughts on the removal of the currency cap

The Czech National Bank (CNB) has removed its cap against the Euro, which I blogged about earlier this year. Though the signs had been pointing to an early removal (headline inflation had been within the target range since October last year and the CNB had hardened its signalling language), the timing of yesterday’s move at the central bank’s extraordinary meeting did come as a surprise. Curren…

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Three things to watch as the Czech National Bank removes its FX floor later this year

For over 3 years, the Czech National Bank (CNB) has maintained the Czech Koruna (CZK) exchange rate close to 27 CZK to the Euro (EUR), essentially using its currency – as opposed to interest rates – as the policy tool to achieve its inflation target. Earlier this month however, the CNB advised that this strategy would be exited “around the middle of 2017”. Though the timing remains ambiguous (t…

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A wrap up of 2016 bond and currency market performance

Turning back the clock to the first week of 2016, fears of a Chinese slowdown and the Federal Reserve beginning to normalise rates hit stock markets hard. By Valentine’s Day bond yields had fallen to – what was then – all-time lows.  But we hadn’t seen anything yet. Ongoing ECB QE, Brexit, UK QE, novel Japanese monetary policy, president-elect Trump and ECB tapering. In a year of political and …

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Emerging market debt: 2016 post-mortem and 2017 outlook

Despite a year of high political turmoil – which of course included the UK EU referendum and the US elections – emerging market assets proved surprisingly resilient to the various global events, even with rising core government yields in the second half of 2016.  Given that starting valuations at the beginning of the year, both with respect to credit spreads as well as currencies, were pricing …

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Emerging Markets debt: 2015 returns post-mortem and 2016 outlook

Following on from Gordon’s review of the best and worst performing fixed income asset classes last year, I wanted to take a more in depth look at how emerging markets performed in 2015 and what to look out for in 2016.

Some themes that drove the market in 2015 were the same themes than drove it in 2014. Once again, asset allocation was critical. Local currency debt, for the third year running, …

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