Chart of the Week: FX Risk Indicator
Head of Macro Analysis
Summary: In today's edition, we focus on the FX space and discuss the evolution of risk perception.
Our FX risk indicator is based on the evolution of Asian currencies (excluding Japanese yen) versus the US dollar. Since Q2 2019, we see a continued improvement in risk appetite in the FX space, which has not happened since the end of 2017/early 2018. In our last update, our indicator is up 1.3% vs the USD on a quarterly basis. The most important driver of risk appetite/risk aversion has undoubtedly been the US-China trade war over the past two years. It has played a key role as driver of FX exchange rate, notably in Asia. The recent trade truce which has been formalized by the Phase 1 trade deal, along with year-end improvement in USD liquidity have favored risky assets versus safe heavens. We expect this trend will be prolonged in Q1 this year as liquidity will keep increasing and geopolitical risk should remain broadly contained, at least on the Chinese-US front.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.