The discussion dives into the ongoing effects of US tariffs and their role in supporting the dollar's strength. There's a spotlight on how these tariffs might impact Canada's economy and the Canadian dollar as February looms. Insights into the Swiss Franc and British Pound reveal challenges due to recent economic data, while the repercussions of the Bank of Japan's rate hike on the yen are analyzed. Tariff uncertainties also shape currency dynamics, particularly concerning the Chinese yuan and US-China relations.
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insights INSIGHT
Tactical Dollar Approach
US tariffs will be a multi-quarter theme supporting the USD.
A tactical approach to trading is needed given cross-currents and stronger-than-expected European PMIs.
insights INSIGHT
Canadian Tariff Risks
Canadian tariff risks are underpriced, with a potential 25% tariff looming.
This poses an asymmetric risk to the Canadian economy, with topside demand for USD/CAD calls surging.
insights INSIGHT
Swiss Franc and Sterling Outlook
The Swiss Franc's strength is challenged by better-than-expected European PMIs, but growth risks remain.
Sterling's bearish outlook continues despite PMI beats, with stagflationary risks.
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US trade/ tariffs will be a multi-quarter theme and support for USD. Our bias remains long USD given its growth and yield advantage, but the trading approach needs to be more tactical. A (short) window has opened up for carry/ high beta recovery. Carry still favours the dollar but several high beta have started to screen more attractive. Funders, particularly CHF, will be vulnerable if DM yields stay elevated. DM central banks next week but most ex-Fed not meaningful for FX.
Speakers:
Meera Chandan, Global FX Strategy
Arindam Sandilya, Global FX Strategy
James Nelligan, Global FX Strategy
Patrick Locke, Global FX Strategy
At Any Rate