Macro FX trading Q2 2023 commentary

SaxoSelect Commentaries
Instruments tradedFX spot
Asset classesFX
Investment style Discretionary (non-systematic), macro analysis
YTD return
-14.47% (net of trading costs, service fee and performance fee -
considering a performance fee for investing since inception but,
since your performance fee will depend on your point of entry,
your net returns will vary too).
Annualised volatility
Average trades per week

Market overview 

The strategy underperformed over the course of Q2 2023 with the pair USD/NOK contributing most to the underperformance following a larger than expected 50bp interest rate hike by the Norway Central Bank which is signalling additional hikes. On the plus side, an AUD/USD position contributed most to positive performance. 

Over the course of Q2 2023, global rate markets reversed a significant percentage of the falls in rates experienced in Q1 after the US banking failures.  A strong rally in stocks led by the tech sector added to the underperformance of safe assets such as bonds and gold.  

The UK is battling a very high core inflation number, coming thereby with a 50bp hike towards the end of Q2 and pressuring other rate markets higher in sympathy. GBP currency rose to 1.2850 GBP/USD,although it failed to make further gains towards the end of the quarter. The European Central Bank (ECB) hiked rates by 50bp and signalled a further 25bp hike in July with the September meeting subject to further data analysis. 

Data from China reflected an economic decline, partly because the recovery from its stringent COVID-19 lockdown measures has not been satisfactory, but also due to the weakness in the property sector. These weaknesses combined with mixed rate decisions, and the commodity currencies fluctuated with Chinese headlines eventually finishing the quarter not so far from where they started.

Strategy performance (net of fees)

Since inception (February 2015): 153.70%

Best-performing positions


Worst-performing positions



Policymakers’ reactions are on the watch during Q3, against a backdrop of sharply declining economic data and interest rates in China and a string of positive US data.

Given recent FX moves, the current focus is on Asia. The People’s Bank of China (PBOC) has sought to slow down the pace of the fall in the Chinese yuan (CNH) currency, which has been hit by a weak economic situation, US Fed's interest rate hike, as well as domestic economic policy adjustment.

Additionally, the Bank of Japan (BOJ) meeting on the 28th of July is expected to result in a continuation of the super-easy policy and ongoing Japanese yen (JPY) strengthening.

Another focus point is the commodities currencies, which are heavily correlated with commodity prices, especially oil, whose price has been climbing and approaching the top of its range alongside other commodities. OPEC+ production cuts are expected to cause supply deficits during the latter part of 2023, supporting higher oil prices. 

Equity markets can impact cyclical currencies, so the strategy observes signs of rotations between the growth stock sector versus value as the earnings season approaches.


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