Today is an important day, as we believe tomorrow will bring peak inflation in the US on a cyclical basis. This means that we think that the current market action (stronger dollar, stronger equities, i.e., stronger deflation) is more likely to become the dominant theme in markets. We see this has happened to a degree over the last month:

Further, we see in our currency bloc monitor that the US has been sucking capital out of every geography over the same period:

We think this is happening on the back of the ongoing policy-liquidity tightening happening in the US. Further, this strong dollar theme comes at a time where we expect US cyclical inflation to peak (CPI tomorrow):

Given this macroeconomic backdrop of slowing and stabilizing economic growth rates, we think it is time to fail down our enthusiasm for commodity exposures. This does not mean that commodities can’t go up any further or are a good short. We just think that the time for the “no-brainer” commodity trade is now behind us. Further, we still think we are in a positive global growth environment- and we expect global equities to do better than commodities from here on. In particular, we think the setup is still positive for US equities, which have seen strong momentum over the recent months:

As a refresher on our lenses:

  • Trading Range: These ranges represent a trading bank within which a currency should trade based on multiple market factors. If we are long- prices above the upside range indicate the asset is expensive, and prices below the downside range suggest that they are cheap and vice versa if we are short.
  • Year-to-Date Returns: This is the price performance of a given currency over the course of the current calendar year, in percentage terms. We also compare the current price to the 52-week high and low for reference.
  • Price Momentum: This looks at cumulative rolling returns for a selected lookback period.  Positive momentum is good if we are long and bad if we are short. 
  • Implied Volatility Discount/Premium: This tells us what the market expects in volatility relative to the history of volatility. If we are long a currency, we typically want market implied volatility to be higher than historical volatility and vice versa if we are short.

As a reminder- it is not just enough to have the technical tools we provide here daily. You need to know the fundamental developments in markets that are driving these moves promptly. Head to to get access to our research and analysis!