Skip to main content
RSS Feed

Latest FX Analysis

Markets

How Long Can the MXN Rally Last? Galen Stops looks at the drivers behind the appreciation of the Mexican peso and asks whether the rally can continue. Few, if any, saw this coming. After Donald Trump won the US presidential race in November 2016, USD/MXN went from 18.03 up to 20.89, and by the time of his inauguration in January 2017, the exchange rate was up to 21.58. This depreciation of the peso seemed eminently reasonable at the time, given that on the campaign trail Trump had promised to renegotiate the North American Free Trade Agreement (Nafta) in America’s favour or terminate the agreement altogether, not to mention building a border wall between the US and Mexico at the latter’s expense.
Playing the Long Game in China Despite a bearish outlook on China and its currency right now, panellists at Profit & Loss Shanghai claimed that in the long-term, the fundamentals are in place for RMB development. While China’s economy continues to enjoy growth rates that most fully developed economies could only dream of, the slowing of this growth rate has led to negative sentiment about China from some international investors. “The perception outside of China about China’s economic rebalancing is very critical right now,” said Ivan Shi, a director at Z-Ben Advisors.
Solving the RMB Dilemma The Chinese authorities face a range of challenges as they seek to protect the economy in the face of downward RMB pressure. In 2016 the Chinese authorities are assumed to have intervened in the currency markets, not in order to depreciate the RMB but actually to maintain the value of the currency. “The consensus from economists is that there’s going to be downward pressure on the RMB,” noted Shawn Baldwin, chairman of AIA Group, on the opening panel at Profit & Loss Shanghai.
FX Trading in 2017: Plenty of Surprises to Come Last year the FX market was highly event driven, with periods of sustained low volatility occasionally punctuated by large but episodic market moves. Looking ahead to 2017 and there are already clearly some events set to take place that have the potential to drive further bursts of volatility, namely the invocation of Article 50 by Britain to begin its exit from the European Union and the scheduled political elections in France, Holland and Germany. In addition, the change of policy direction expected under US Presidential-elect, Donald Trump, and the US Federal Reserve’s indication at the end of 2016 that it currently plans to raise rates three times this year are expected to be major drivers of the currency markets in the coming year.
Now You See It... Understanding Sterling’s Flash Crash On October 7, Cable flash crashed in early Asian trading, leading to chaos in the market and an official investigation into events surrounding the move. Colin Lambert takes a look at what happened. A few minutes into October 7 UK time, at 12.07.03am to where there are grounds to believe that the transaction is be precise, Cable traded through 1.2600 having fallen 30 points in the previous minute. Just 23 seconds later it traded below 1.2200 and 45 seconds later it had traded at 1.1378 on one platform. Just two minutes later the market was trading back above 1.2100 and just 10 minutes after the initial move, Cable was trading above 1.2400. The market had “flash crashed”.
Few Surprises in Latest BIS Figures So the latest Bank for International Settlements (BIS) Triennial Central Bank Survey is out and, as Profit & Loss previously reported, the headline figure is that the FX market has contracted in size from $5.3 trillion to $5.1 trillion traded per day over the past three years. This news seems to have caught very few people by surprise, however the survey shows spot foreign exchange volumes are lower while FX swaps activity has grown considerably, especially in Asian centres and in the yen.
What Can the Brexit Vote Teach Us About FX Liquidity? The illiquidity in the market following the Swiss National Bank’s (SNB) decision to drop its peg to the euro raised numerous questions about how liquidity functions in the modern FX market, and particularly how it functions in times of ...
RMB Included in the SDR Basket: Symbolic or Significant? The big news this week was the announcement by the International Monetary Fund (IMF) that the Chinese renminbi will be included in its Special Drawing Rights (SDR) basket.  But is this decision purely symbolic or does it have broader implications ...
Goldman Says Go Long USD Against EUR, JPY in 2016 Goldman Sachs has released the first six of its ten top trades for 2016, including two FX recommendations, against an “unusually uncertain” backdrop of Fed rate hikes, ECB easing and volatile oil and metal prices. The bank says that while the ...
AUD: The Ghosts of Overshoots Past AUD: The Ghosts of Overshoots Past The AUD has sailed through levels which would be considered fair relative to domestic economic fundamentals and has begun to provide a stimulatory tailwind to the non-mining economy. Our analysis suggests that this is ...