Macro FX trading Q4 2019 commentary

SaxoSelect Commentaries 5 minutes to read
Saxo Bank

Instruments traded
FX spot
Asset classesFX
Investment styleDiscretionary (non-systematic), macro analysis
Quarterly return–13% after transaction costs but before any service and performance fees
Annualised volatility21%
Average trades per week13 (since inception)

Market overview

Market movements during the final quarter of 2019 were largely determined by the trio of the US Fed (FOMC meetings and their ongoing Repo-Liquidity management into year-end), US-China trade talks and the UK election with its Brexit implications. US yields hit aggressive summer lows at the very start of the quarter, following a weak ISM print, before retracing sharply higher on positive US-China trade developments and settling into a higher range for the remainder of Q4, as the US Fed cut rates by 25 bp at the end of the month. The resulting market stability was aided by US-China trade talks progressing towards a Phase One deal (details of the deal are taking time to emerge) and, in the UK, the Conservative party securing a significant majority after leading in the polls, averting a feared hung parliament, a far-left Corbyn government and further prolonged Brexit uncertainty. 

The partial resolution of this trio of uncertainties resulted in a very strong quarter for risk assets and commodities, steeper yield curves as long end rates pushed higher and the gradual USD selloff accelerating into the final days of the year. For FX, moves were noisy and erratic, yet delivered very low volatility as aggressive mean reversions took hold, resulting in various false breakouts. The GBP rallied into the election result, yet sold off aggressively afterwards as the market took fright at a Tory hardline message on Brexit negotiations.  The commodity currencies moved higher later in the period but lacked traction on positive risk outcomes and a higher CNH, whilst the JPY bounced sideways and the CHF actually rallied. Likewise, the euro stumbled higher during the quarter, lacking energy. 

Portfolio performance

Since inception (05.02.2015)145%

(Performance figures are net of transaction costs but before service and performance fees.)

The Strategy made a loss of 13 percent during Q4 spread across a range of pairs, including losses on GBP/CHF, following previous gains in GBP/USD. 


The questions facing the markets going into 2020 must start with the evolution of the US Fed‘s balance sheet and the strategy regarding its management. As it stands, they remain beholden to the market’s needs by rolling (oversubscribed) term repos and have discussed substituting bills with short-dated coupon instruments, alongside further debate surrounding a POMO such as a Standing Repo Facility.  With plenty of issuance in the 2020 pipeline, it has the look of involuntary debt monetisation, most appealing for the likes of gold and with longer-run implications for the stability of the USD. 

Data will be watched to see how much impact a Phase One trade deal signing might have on economic activity, with a close eye also on how high the CNH might readjust. Geopolitical events in the Middle East are lifting volatility in oil, gold and bonds, though, as before, the moves in equities and FX are far more muted. 

Trade negotiations surrounding the Brexit future deal and the scale of any fiscal easing will shape developments in GBP and, to a lesser extent, the Euro, where politics might perhaps have more impact than the ECB during the quarter. Towards the end of the quarter, we also have the prospect of determining who might be in the running for the Democrats in the November US election. 


Any information found in this document, including performance information and statistics are subject to change. You can find the latest updated pricing information on the description page for each available portfolio. In providing this material Saxo Bank has not taken into account any particular recipient’s investment objectives, special investment goals, financial situation, and specific needs and demands and nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and Saxo Bank assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation. All investments entail a risk and may result in both profits and losses, and all capital is at risk. In particular investments in leveraged products, such as but not limited to foreign exchange, derivatives and commodities can be very speculative and profits and losses may fluctuate both violently and rapidly. Speculative trading is not suitable for all investors and all recipients should carefully consider their financial situation and consult financial advisors in order to understand the risks involved and ensure the suitability of their situation prior to making any investment, divestment or entering into any transaction. Any mentioning herein, if any, of any risk may not be, and should not be considered to be, neither a comprehensive disclosure of risks nor a comprehensive description of such risks. Any expression of opinion may not reflect the opinion of Saxo Bank and all expressions of opinion are subject to change without notice (neither prior nor subsequent).

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