Head of Macroeconomic Research
Summary: In today's edition, we focus on the FX space and discuss the evolution of risk perception.
Click to download this week's full edition of Macro Chartmania composed of more than 100 charts to track the latest macroeconomic and market developments. All the data are collected from Macrobond and updated each week.
Saxo Bank’s FX risk indicator is based on the evolution of Asian currencies (excluding Japanese yen) versus the US dollar. Since Q4 2021, we see a continued increase in risk aversion in the FX space. This is the first time since the first global lockdown in 2020. In our last update, our indicator is down minus 8.9 % in Q3. This is the biggest drop since Q3 2015 when China devalued the renminbi by surprise. There are several aspects behind the rise in risk aversion : the risk of a global recession, the European energy crisis, the consequences of the Ukraine war, ‘permanent’ inflation and, first and foremost, the drop in U.S. dollar liquidity. In our view, this is one of the most important and less commented drivers. Based on our own data, global U.S. dollar liquidity is in a contraction for the first time since early 2019 (at that time the Chinese-U.S. trade war was the main disruptive factor). We expect that the coming months will remain challenging for most of the risky assets (including emerging FX currencies) as the risks mentioned below further materialize. We remain in a U.S. dollar-centered FX market, with very little alternatives.
The end of the road
Emboldened by surging crude oil prices, Saudi Arabia makes waves on the international stage, as Crown Prince Mohammed bin Salman manages to create a World Champions League, after buying the UEFA Champion League franchise.
As the world embraces GLP-1 obesity wonder drugs, the people next in line to get a prescription stop caring about dieting and exercising, figuring that the drug will later solve all of their weight-related health problems.
With the US budget deficit spiraling above 10% of the GDP, the government is desperate to foster demand for US Treasuries. Under intense pressure from the White House, Congress makes income from government bonds tax-free.
After a criminal group deploys the most deceptive AI deepfake ever seen, generative AI becomes a national security threat. With public distrust soaring, governments crack down with harsh new laws, puncturing the AI hype.
To fix the divergence in the global trade and financial system, the largest deficit countries unite to negotiate new world trade terms. For surplus countries, the reset of the global economic model is a painful adjustment.
As discontent with Biden and Trump rises to fever pitch, Robert F. Kennedy Jr sees his support rising inexorably in the polls. On November 5, Kennedy wins the US presidential election, ushering in a new era in US politics.
Stepping up Japan's economic transformation in 2024, PM Kishida brings in a host of populist policies to boost domestic demand. As the GDP growth rate hits 7%, the BoJ is forced to abandons its yield curve control policy.
As people wake up to how little tax Europe’s billionaires are actually paying, the EU Commission implements a wealth tax of 2%. The tax sends shockwaves through Europe's luxury industry, with luxury giant LVMH plunging 40%.
