by David Hill | Nov 16, 2018 | European Economy, Uncategorized
With Rome appearing to square off with Brussels over its contentious budget, BTPs have faced considerable pressure and bank stocks have been hammered. This is the nefarious doom loop: Italian banks own a large chunk of Italian government debt and, given the lack of...
by David Hill | Nov 8, 2018 | US Economy
The widening of the cross-currency basis (JPY, EUR and GBP, in particular) against the US dollar provides further evidence of a structural dollar-funding shortage, which is set to worsen as the Fed tightens. Although the spread typically widens towards year end, the...
by David Hill | Oct 5, 2018 | European Economy
We have previously argued that the Swiss National Bank has become slightly more tolerant of modest currency strength, given that the sheer scale of previous FX intervention has dented the central bank’s appetite for further balance sheet expansion. The top-left chart,...
by David Hill | Jun 1, 2018 | European Economy
On the back of signs that Germany and the eurozone are slowing, we highlight the risk of a drawdown in Polish economic growth. Although Poland is ostensibly a domestic demand-driven economy, it is still highly trade dependent (exports + imports are above 100% of GDP)...
by David Hill | May 3, 2018 | European Economy
Since we highlighted the potential of CE3 markets in July 2017 in light of the global reflation trend, our preferred trade – short EURCZK – has made a modest 2.8%. Even after this relatively anaemic rally, we believe that the koruna will now take a breather. As a...
by David Hill | Mar 2, 2018 | Japan
One of the strongest performers against the USD lately has been the yen, with USDJPY now probing 15-month lows. One of the main drivers has been the surging cost of FX hedging (assume rolling 1 year FX forwards). The top-left chart shows the pick-up for a yen investor...
by David Hill | Jan 19, 2018 | European Economy
Sentiment in Europe has soared to its highest level since 2001. However, in Europe as elsewhere, such lofty sentiment should be taken as a warning for markets, not a green light. As we can see from the top-left chart, previous peaks in economic sentiment have...
by Simon White | Jun 16, 2017 | European Economy
Macro headwinds are building up for long EURUSD positions in addition to signs that EURUSD is becoming very overbought technically. A few weeks ago we noted that EURUSD sentiment was one of the most bullish (contrarian indicator) among the 50 major FX pairs we track....
by Bill | Feb 24, 2017 | European Economy
(from our Weekly Update of 14th February 2017) Rising inflation in the eurozone is driving real rates lower, widening the rate differential between the EUR and other DM currencies. We look at risk-adjusted real-rate differentials by dividing real-rate differentials by...
