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Monetary policy is driving G10 – Deutsche Bank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 22, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Research Team at Deutsche Bank, suggests that there has been a gradual rise in trendiness in the G10 FX universe over the past two weeks, although markets are not highly trending yet.

    Key Quotes

    “Smoothness has declined a touch, but less than might be have expected given last week’s Fed tightening and markets are much calmer than they were a couple of months ago . Cross-correlation among currency pairs has picked up after a brief dip in broad USD trend early this month.”

    “Monetary policy remains a dominant driver in G10, but has somewhat surprisingly been joined by carry. Higher short end rates in the antipodean countries have helped the currencies out-perform, as well as relatively high carry and tight CDS spreads. Among the macro drivers, growth and current accounts are currently displaying a strong negative correlation with FX.”

    Emerging Markets

    “There has been a similar improvement in trendiness in EM, although markets are somewhat more volatile. Like in G10, uniformity remains high, although has declined slightly in recent weeks.”

    “There is a very low aggregate cross correlation between EM FX and market or macro variables, suggesting that overall market themes remain limited and idiosyncratic drivers predominate, such as the very poor performance of ZAR and RUB, but much improved one of IDR.”
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