Tag Archives: Charles Porter foreign exchange

St Mary Axe view

Morning Brief – Take off

Take off

 

April is usually a strong month for GBP. Due to the UK tax year’s end at the beginning of April, large corporations domiciled in the UK bolster demand for the UK Pound when repatriating overseas profits. This real money flow tends to provide a significant and tangible bid in GBP that sees the spot price outperform. Until yesterday at least, April had not been kind to the Pound with its major crosses continuing to leak value at a moderate yet steady pace across the board. Yesterday, however, Sterling reared up gaining almost two cents versus the US Dollar within the European trading session alone. So have FTSE100 giants finally balanced their books and started bringing their cash over?!

 

In truth it is highly unlikely that yesterday’s rally in GBP was the result of large corporates brining overseas profits back to the UK. One reason for the limited real money flow from overseas earners this month is the very lack of foreign profits. Whilst pharmaceutical companies may have secured sales overseas, the intra-pandemic tax year of ‘20-‘21 was typically not one of star studded international sales. Due to the political shift associated with Brexit too, capital allocation overseas in sectors from financials to industrials has risen possibly reducing the desire to repatriate profits.

 

So if a rose-tinted April is not on the cards this year, what then was behind the rally in GBP yesterday? Well, the first thing that kicked GBP in the right direction was positioning data that was released over the weekend. Many market participants had expected the falling GBP in the last week or so to be a result of investors losing conviction and confidence in their long-Sterling positions. Accordingly, it was widely expected that this positioning data would confirm further consolidation in the net-long GBP position within the speculative portion of the market. What was released showed quite the opposite with GBP long positions being added to in significant volume suggesting some floor to the speculative unloading of Sterling.

 

Secondly, UK vaccinations have continued at pace with evidence suggesting that the lack of AstraZeneca doses is not having a devastating impact of the UK’s ability to inoculate its population. This did and will continue to provide support once again to the Pound. So too the safety concerns associated with such vaccines that are gathering pace internationally have not deterred the UK population it seems from offering up their chosen arm.

 

Yesterday’s rally also corrected recent GBP weakness ahead of a data heavy week. Should data released this week surprise to the upside or demonstrate a more resilient recovery in the UK economy, GBP could have room to move considerably higher. Key events to watch out for include employment figures today, CPI inflation tomorrow and retail sales to end off the week. Remember, that given the period in question barely covers the opening up of the economy and will cover a period ahead of the pent-up consumer demand that has been recently released on non-essential retail, a data-driven rally could still be some periods off.

 

 

 

Discussion and Analysis by Charles Porter

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Morning Brief – This statement is false?

This statement is false?
 

If you like a paradox you might be no stranger to unravelling self-contradictory statements like ‘this statement is false’ or ‘I am lying’, or perhaps puzzled over Achilles’ tortoise. But there’s an apparent paradox unravelling in the foreign exchange market this week. Following the release of the latest CFTC data over the weekend, it is apparent that there is still a significant long position left open within GBP markets. Of the speculative arm of the market, approximately a net 14% of open market interest is positioned to benefit from a rising Pound. This positioning has been trimmed in recent weeks with last week alone seeing long GBP positions squeezed some 3.7% alongside the falling spot price. Here’s the paradox: downside protection in GBP is now more expensive than contracts that provide equivalent upside exposure in GBP markets. So if participants are still positioned for an upside shift, why are they pricing for a downside move?

 

If we look behind the paradox this might be explained and give us an insight into where GBP might go. If the market is pricing downside protection as more valuable than upside exposure it represents a likely crowding of participants on one side of the market to sustain the imbalance. It is also therefore likely to reflect the market’s expected directional movement in the underlying spot price. As it stands in GBPUSD/GBPEUR markets, Sterling’s two major crosses, put options are consistently more expensive across the spectrum of traded contracts than equivalent calls, hinting towards a move lower in GBP. Options markets provide a more timely and reflective snapshot of the market than positioning data by virtue of being openly traded contracts. One potential explanation to unravel this paradox is therefore a time inconsistency: the positioning data is simply out of date.

 

There is some truth in this argument and the positioning data at the moment is playing catch-up with the spot price and balance of implied volatilities on each side of the options market. However, what provides a more comprehensive picture of the market is understanding that the options market is pointing in favour of a downside move to offset the open market’s long Sterling positioning. With a lack of fresh reasons to get behind the Pound, its favour has been slipping on the market. Accordingly, those with exposure on GBP are questioning their conviction in GBP given the year-to-date rally and a slow but sure long-squeeze in GBP has been underway. From this perspective, the downside skew within options markets should be read as a hedge against open market positioning.

 

With lagging vaccine euphoria hampering Sterling bulls, the short term Sterling outlook remains pessimistic. As England and Wales eased their respective lockdowns yesterday to allow non-essential retail and many outdoor hospitality venues to reopen, the Pound did enjoy some support. Data will be critical to the recovery with the spending by Brits in the coming days in the pub, restaurants and particularly retail to be watched closely to see how excess savings and pent-up demand translate into consumption and economic growth.

 

 

 

Discussion and Analysis by Charles Porter

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Morning Brief – It’s a Moderna world…

It’s a Moderna world…

 

The whirlwind surrounding the AstraZeneca-Oxford vaccine continues with new warnings from UK and EU medical regulators flooding in yesterday. Following a review into the efficacy, benefits and risks associated with the vaccine the double-dose shot is once again in the firing line. The guidance from the European Medicines Agency is that there is a link between blood clots and the Astra-jab. Accordingly, this should be listed as a rare side-effect of the jab. However, given that its public benefit hugely outweighs the individual risk of taking it, this body continues to endorse the jab in its Covid-19 vaccination guidance without reservation. The response from the UK Medicines and Healthcare Products Regulatory Agency [pauses for breath], was different: under 30s should be offered an alternative vaccine to the AstraZeneca jab.

 

If you hadn’t seen this news, which did have a marked impact on GBP markets yesterday, I’d forgive you for thinking that my understanding of prepositions requires improvement. Having seen the initial rollout of the vaccine in the Eurozone, notably Germany and France, be accompanied by an age cap of 65, why are regulators now instead putting a floor on advised recipients of the vaccine at age 30? The argument for this age floor is unclear. Cynics might suggest that given the risk-based and consequently age-staggered vaccination programme that the Medicines agency has pursued, putting an age floor in allows a regulatory response to avoid accusations of negligence whilst not yet harming the rate of inoculations in the UK.

 

This explanation too might hold weight. Those side-effects reported to the regulator in the UK included at least 19 deaths following injection with the vaccine in question. Of those, only three persons who sadly lost their lives were under 30. Given the systemic importance of the AstraZeneca jab to the UK vaccination programme and in turn the boost given to GBP by the medical covid-response, GBP has suffered following this review.

 

Yesterday, the UK administered its first public Moderna vaccinations in Wales. The level of vaccinations offered produced by other pharma companies fell to their lowest level so far this year as UK supplies of Pfizer and AstraZeneca equivalents continue to encounter delays. With the elevated positioning achieved by an 8% rally year to date in Sterling and with shifting market positioning ahead of the FOMC minutes release last night, yesterday was a day of profit taking and de-risking to the detriment of the Pound.

 

 

 

Discussion and Analysis by Charles Porter

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Morning Brief – Head above water

Head above water

 

GBP has struggled in recent weeks to find new momentum. Thanks to its somewhat meteoric rise so far this year, this lack of sustained upward price momentum has fuelled second guesses of a correction in the UK currency. Sterling’s range bound existence on a trade weighted basis this month has allowed Sterling bulls to unwind portions of their long bets in favour of the Pound and to take profit. The problem for navigating the immediate future of GBP lies in the fact that fundamentals lie in favour of buying the currency, but it’s lofty price, at least compared with its intra-pandemic valuation creates conflicting forecasts. Ignorant of price therefore, Sterling’s a no-brainier: a world-leading vaccination programme, inflation outpacing expectations, lower political post-Brexit risk (just about!) to name only a few. But inclusive of price, it’s a more challenging picture: does GBP still hold upside growth despite an 8% rally year to date?

 

Spoiler alert: yes, probably.

 

When the UK announced a Brexit deal on Christmas Eve, the Pound didn’t jump. This was to the surprise of many who supposed that given more than four years of blaming the 2016 referendum and the subsequent negotiating period for undermining GBP, the removal of a significant proportion of the political obstacle should allow for a smooth advance higher. In fact the only thing that shifted immediately was the year-end overnight borrowing/swap market in Sterling in a colossal risk adjustment market-wide shift. This did not, however, translate into spot, like-for-like valuations. This was partially because the deal failed to satisfy those with high hopes of a strong trade deal and the swift reminder of other political risks that had been created or still remained as a result of the process: queue Sturgeon, Farage, Juncker, Barnier & co. Rather the adjustment in GBP was a slow burner with evidence of money moving back into the UK and a reallocation of capital onto UK shores throughout 2021 to date. As the post-pandemic environment facilitates higher levels of productive capital allocation, there’s a lot of reasons to suggest GBP will be a beneficiary of this.

 

So if pricing, levels and technical factors are what might stand in the way of a rising GBP, how is GBP strength still the likely base case? The answer is GBP finally, after an 8% rally this year, has its head above water. The post-referendum channel bound trade weighted GBP has finally, seemingly, been broken and only now does the Pound have the technical case to support further appreciation despite its sharp rally and historically lofty valuation. With the range broken, GBP should have the floor upon which to navigate a post-pandemic, post-transition environment higher. Due to the valuations in GBP, and the combined fragility of the post-Brexit trade deal and the post-pandemic recovery period, this case will be regularly challenged and frequently volatile.

 

 

 

Discussion and Analysis by Charles Porter

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Skyscraper view

Morning Brief – Europe‘s third wave

Europe‘s third wave

 

Rising infection rates across much of Europe have been leading to souring fortune for the Euro with the world’s most liquid currency pair EURUSD providing a good snapshot of the rising Eurozone concerns over the past weeks and months. Announcements of lockdown impositions across Europe have spilled out like clockwork with core members of the Union limiting social mobility one after the other in order to attempt to limit the spread of the virus. Introducing peripheral measures and localised lockdowns until now, France and its President Emmanuel Macron have now conceded that a national lockdown totalling at least four weeks must take place to limit further hospitalisation and deaths associated with the covid-19 pandemic. Following the first lockdown, Macron’s stance on education has afforded him a degree of support as a proponent of the importance for schools to remain open. With strong evidence of viral spread in schools affirmed by the data from their testing programmes, through a combination of homeschooling and seasonal holidays, schools will now remain closed for three weeks at least in France, in a reminder of the severity of the spread in continental Europe.

 

The limited measures across a handful of member states over the last couple of months have seen elements of lockdown introduced across the Netherlands, Italy and Germany amongst other states. Rising infections across Europe’s open borders is fostering a more severe economic downturn from the third wave of the pandemic than had been expected moving into this seasonal shift. This undermining of expectations and a downgrading of economic forecasts provide the key to understanding the most likely path of the Euro. Globally, a third wave has been common place but it is the severity of Europe’s particular experience this time around and the souring of sentiment within the Eurozone that will limit progress in the Euro over the coming weeks.

 

In the UK, the vaccination programme is now sufficiently advanced in order to isolate a statistical significance to the role of the vaccination programme upon transmission and hospitalisation in the aggregate population. This follows experimental findings and empirical studies of nations including, for example, Israel who led an early immunisation push. This fact is giving further weight to the importance of a successful immunisation programme which at the moment is relatively non-existent in the Eurozone. Whilst the depreciation of the Euro associated with revised expectations to date will provide a discount in the Euro and a lower base from which to magnify a catch-up effort, the momentum remains on the side of continued underperformance rather than catch-up. The reality it seems in the Eurozone therefore is weakness in sentiment and the bloc’s currency for longer than anticipated until forecasts begin to align once again.

 

The continued fallout from the handling of the vaccination programme and in particular the bloc’s handing of the Astra vaccine could damage its fortune in markets. With Macron having to backtrack on his policy surrounding the importance of the schooling and education sectors remaining open, we are reminded of the potential political implications of this third wave. With elections in France only a shade over 12 months away, a populist energy is building in France. This shift is evident across the Eurozone and visible within recent electoral outcomes across Germany and the Netherlands and could mean the legacy of covid-19 continues to affect the Euro long after the market’s fixation on relative case rates expires.

 

 

 

Discussion and Analysis by Charles Porter

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team discussion

Morning Brief – Hey Ho up she rises

Hey Ho up she rises

 

Carrying 18,300 containers, the cost of the stranded Ever Given vessel in the Suez Canal was costly for its operators, Taiwanese Evergreen, the privately operated canal, global trade, and me. Perhaps my IKEA package that spent nearly a week of it’s pre-delivery life on that boat stranded just outside the Egyptian city of Suez is small change in comparison. In fact, the private canal operators are expected to have lost tens of millions of Dollars in foregone passage fees. The estimated hold up to global trade could have knock on effects that leave a lasting impact on annual figures with just-in-time supply chains already at breaking point due to the pandemic. After the spring tide allowed the gigantic container ship to be refloated into wider passages of the canal for inspection, the price of oil immediately fell 1%. The Suez blockage has created interesting dynamics in commodity markets that in turn have fed into commodity currencies and risk assets in interesting ways.

 

Consider Brent crude oil: the European benchmark of North Sea oil adopted globally. A lot of the supply of Brent crude passes through the canal each day satisfying demand from the Far East. Similar delivery methods to keep this market ticking involved taking over one week of additional travel and shipping time and cost to go around the Horn of Africa. This constrained the supply of Brent crude within the market but also had a knock on impact upon demand as it was reallocated elsewhere geographically where possible. This conflict between supply and demand made the price action messy with the price of many commodities showing a high degree of volatility as they reflected idiosyncrasies of the individual deal and delivery more than generic futures contracts.

 

Provided that the total volume traded of each commodity whose price rose due to the Suez crisis did not fall, so as to deliver a lesser total revenue, the blockage could be positive for the national currency that has a chiefdom within the export market for that particular commodity. I.e if one nation exports one commodity whose price was inflated, provided they face an ineleastic demand curve it would entail more demand of local currency whose price in turn should rise. The equities rout on Friday has further obscured the impact of the supply chain woes upon commodity currencies. So too the surprise turn in the course of the pandemic in Europe is still unsettling global commodity markets.

 

There is one further risk that will create opportunities associated with the volatility and uncertainty that it will inevitably cause: data. Did you know airline passenger numbers are up 491% in the US compared with one year ago? ‘Tis the season for year on year annualised data crimes due to the medieval levels of economic activity associated with this observation period across the globe one year ago. Rather therefore, a more accurate picture would be one year ago one bloke and his carry-on went on a flight, versus 491 people today – still peanuts versus our pre-pandemic path. This reality will make isolating the trend and recovery from the noise harder and possibly lead to more volatility in markets struggling with erroneous data.

 

 

 

Discussion and Analysis by Charles Porter

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Morning Brief – More stimulus?!

More stimulus?!
 

When you look at the inflation concerns that have been developing in the US economy as a result of Biden’s €1.9tn stimulus package you may have thought it would be madness to start planning yet another round of $3tn worth of stimulus. After all, if people thought that the existing package risked creating excessive inflation and the economy would be over stimulated during the recovery phase from the pandemic, how can borrowing and spending even more be any different. But I’m not so sure. Whilst the initial headlines may have been a surprise, this new stimulus plan could provide support to the US economy without risking undue inflation and crowding out the private sector.

 

Let’s make it clear initially that the $3tn stimulus plan was a headline grabber. This fiscal stimulus policy was something that the White House is reportedly considering and not something that is a reality or even close to fruition yet. Rather the prospect of it in the US and indeed globally is critical to understanding how the global foreign exchange market will react to national recovery programmes and how nations can determine their own recovery. It is the job of the White House as it is any government to consider every policy possible and to analyse the best path forward. But let’s say the US economy (or any other for that matter) really did pursue a fiscal response of this size during the recovery phase of the economy. After the tsunami of stimulus that has preceded it – could the economy soak up that extra spending and what would be the result?

 

The core of my argument is that the proposed $3tn stimulus plan is completely unlike the stimulus plan of $1.9tn that got markets up in arms and marching for the exit in the bond market recently. The stimulus that President Biden has already passed afforded direct payments to US citizens and was a crisis era response policy. With a world class vaccination programme and a well positioned economy it was thought that the short term fiscal stimulus including putting purchasing power into the pockets of US consumers directly would cause upward price pressure. However, the plans now supposedly under consideration concern infrastructure spending programmes designed to level up the economy, invest in its supply side capacity (typically a deflationary exercise) and expand the productivity of the US economy.

 

There is and will still be a considerable output gap in nations emerging from the pandemic and productive capacity is likely to remain both below pre-pandemic absolute and projected levels for some time. Therefore, when the nature of spending and borrowing is targeted towards infrastructure and productivity spending, the effect is not inflationary, unlike putting another $1,000 in someone’s pocket. Similarly, whilst the amount spent is larger in the proposed infrastructure plan, it is investment and productivity spending that are likely to see the slowest recovery in the private sector having been caught on the back foot for the past year. The time horizon of infrastructure spending is also considerably longer – how long does it take to build a bridge, or upgrade telecommunications or deliver a new cross-country railway versus spending $1,000 in your pocket?

 

Infrastructure borrowing and spending should be a key component of any successful nation’s response to the pandemic and help foster a more even and balanced global recovery than the economic crisis of 2007/8. Encouraging borrowing at the longer end of the yield curve due to the duration of the spending projects, this should steepen rather than crowd out the yield curve and encourage growth expectations. Normally, this would play out to the benefit of the national currency, however, with a unique safehaven status and often idiosyncratic reactions to economic adjustments, the path of USD will be less clear.

 

 

 

Discussion and Analysis by Charles Porter

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Morning Brief – Fowl Play – Stuffed Turkey

Fowl Play – Stuffed Turkey

 

A dramatic move over the course of the weekend has the Turkish Lira on its knees with the monetary credibility of Turkey back at all time lows. Yesterday’s European trading session saw the Lira priced around 10% weaker versus its closing price on Friday afternoon. Given market positioning around the Lira and the significant degree of focus that markets have afforded it so far this year, the devaluation has had ramifications for the wider market, not least the basket of emerging markets for which this move in Turkey served as a timely reminder of the institutional instability and capture in emerging market economies.

 

On Thursday, the central bank Governor hiked interest rates by 2% to tame the nation’s rampant inflation rate and continue to support the nation’s currency. This rate hike was welcomed by the market as it brought rates to 19% which, even with Turkey’s untamed inflation rate in the teens, afforded one of the only positive real rates on the planet. With interest rates almost 10% higher since this time last year, the Lira had become the best performing currency across the market year to date. This stronger currency was providing the self fulfilling prophesy of controlling import-driven inflation and moderating the economy to sustain currency and economic stabilisation. However, someone didn’t like it: President Erdogan.

 

The President has exercised control over Turkey’s central bank for a long time helping to fuel currency crises over the past few years. He has publicly claimed that higher interest rates over a sustained period actually cause higher inflation than lower rates – not something that any economist has been able to support theoretically or empirically. The presidents own study of Erdoganomics has therefore led to a constant clash of heads between central bank governors and government. The authoritarian nature of national governance has therefore delivered Turkey with its 4th central bank Governor in three years… and counting.

 

To deliver President Erdogan’s prescription of low rates, an academic who has long shown a persuasion towards and even lobbied for lower rates in Turkey has been appointed as the new governor. The move forced the market to unwind the carry trades that have sought to capitalise on the Lira’s appreciation and positive real yield at break-neck speeds, sending the currency plummeting. Those carry trades were funded by short low yielding Euro and Japanese Yen positions. There was significant evidence of Yen and Euro buying to cover these short positions at the expense of the free falling Lira. A persuasion towards low interest rates will deter Lira buying, encourage still higher inflation rates with the monetary credibility of Turkey already in tatters. The Lira will struggle to post any further gains within this regime.

 

 

 

Discussion and Analysis by Charles Porter

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Figures

Morning Brief – Powell: and the yield is gone

Powell: and the yield is gone

 

Improving economic forecasts for global and US growth in particular have been captivating markets in recent weeks as we have spoken extensively about. The main impact has been to drive up the yield on US debt to reflect the increased inflation and growth that lies in store for the US economy. Before the US Fed announcement and press conference by Chair Jay Powell, the generic US ten-year note reached post Jan-2020 highs in excess of 1.65%. His testimony, however, did not address the rising risks of inflation that the market has been increasingly sensitive too and accordingly US central bankers took no monetary action akin to the ECB last week, to address the rising bond yields in the US. Holding rates close to zero, the Federal Reserve’s expectations for interest rates out to 2023 and the future beyond barely changed with a meagre two (out of 17 total) additional members expecting a rate rise above previous forecasts by the end of 2023.

 

There are two possible interpretations of this monetary policy decision and in the 12 or so hours that have unfolded since the decision was made by the US monetary authority, we have seen both. The first interpretation is for the market to take the Fed’s predictions of underwhelming inflation below target over the medium run at face value. It is therefore to concur with Chairman Powell that inflation later this year will be transitory and more accommodative policy is required to stimulate the economy during the bounce back from the pandemic despite the additional fiscal stimulus that Biden’s Presidency has so far provided. If the market steps back and believes the Fed that inflation is not an issue and tapering is not something that is required at this point and policy is where it should be for now then yields would fall, value be released from the Dollar and stocks rally on the back of easier market-derived credit conditions.

 

The other interpretation is for the market to stick to its guns and continue to forecast higher inflation alongside the upward revisions to GDP growth that we have seen so far this year. From this perspective the Federal Reserve has allowed the fuel of easy monetary policy to continue to spill into the fire of an economy positioned to overhead with above target price inflation. Under this interpretation the Fed has opted deliberately to fall behind the curve and leave itself vulnerable to be led by, rather than leading, the market. If the market sticks to its forecasts of higher inflation in the coming years and the need for tapering and the removal of stimulus in a boom cycle, yields would continue to rise, encourage further demand into now non-negligible USD interest and risk the kind of equity market correction that has been forecast at higher levels.

 

Last night, outside of European trading hours, the Federal Reserve delivered its monetary policy decision. The immediate knee-jerk reaction last night was more stimulus, equals lower yields for longer, weaker Dollar and outperforming equities. Scenario one therefore played out, pushing EURUSD back towards 1.20 and GBPUSD towards 1.40 overnight. As the European open began to wind up this morning, however, the second scenario began to take hold. The market realised that lower for longer actually exacerbates their projected inflation overshoot and undermined the demand for US treasuries at current valuations and pushed yields higher. The 30-year generic US note pushed on further to exceed August ’19 highs. This higher yield and a reversal in the market’s interpretation saw the Dollar claw back some strength once again as the 10-year note hit new post-pandemic highs in excess of 1.75%. The market is therefore betting that the Fed will have to blink at some point. Until it does, the Dollar should continue to strengthen in line with rising yields and the bet that the US will have to normalise policy first.

 

 

 

Discussion and Analysis by Charles Porter

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Morning Brief – Driver

Driver

 

The slack water as the pull of the pandemic is replaced by the recovery phase is over. With Brexit growing ever smaller in the rear view mirror of FX markets, there are new forces afoot driving foreign exchange flows. The main driver of markets is the asymmetrical bounce back from economic and social lockdowns thanks to a variety of vaccination and preventative responses to the pandemic. The OECD recently revised its assessment of the global economy as we emerge from the pandemic. In combination with successful vaccination programmes globally, President Biden’s $1.9tn stimulus program has led to a 1% upward revision to global growth this year. These drivers should force USD higher in the short run but facilitate its own demise in the longer run.

 

The US continues to surprise the market with the progress it is making in its own vaccination program. Following the handover of office less than two months ago, few would have expected the US to be vaccinating millions of people every day. The program has been so successful in fact that President Biden has now committed to offering every US citizen a vaccine by the 1st of May, only one and a half months away. On top of that, whilst the fiscal response to the pandemic by President Trump was generous in the first phases of the pandemic, the US economy was in many peoples’ view in need of fiscal stimulus. Despite the presumption that President Biden would pursue such stimulus measures, few believed he would have been able to get a deal of this magnitude into legislation including many pro-consumption measures to stimulate the economy that have since been realised.

 

The gap between the US and Europe in particular is still widening and it is this acceleration that is highlighting the outperformance of the US economy, its assets and even its currency. Markets have not shared the same level of conviction on EU reflation as they have the restoration of economic performance on the other side of the Atlantic. For now, whilst rising optimism and an improving economic outlook seem like largely US phenomena, the pull of the Dollar is unrelenting and its appreciation is driven by its relative economic prospects. However, the differential between US economic forecasts cannot last forever. There are only so many jabs you can put in your population’s arm and a limited number of meaningful cheques that you can put in the post to US citizens.

 

As the rest of the world rebalances, reopens and reflates cash will flow back out of the US Dollar. The US recovery, given that it concerns a leviathan of global trade, will spill over to the rest of the world, aiding global growth. As herd immunity is achieved across other major swathes of the global population the diminishing performance differential between the US and the rest of the world in combination with a better global trading backdrop will allow demand to be released from the Dollar. This weekend too has provided a reminder of the propensity for European political change this year. Political change could provide conditions for greater fiscal support to a laggard Eurozone economy, accelerating the normalisation of EURUSD above 1.20 in the longer run.

 

 

 

Discussion and Analysis by Charles Porter

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