Last week, we pivoted away from commodities to favour equities. A move that we believe in has come at the optimal time given OPEC+ recent announcement that it will begin to increase crude oil production. Now, while today has not been a great day for global equities, we still think there is significant room for equities to perform well in the current environment. Below, we show our tracking of traditional FX and currencies:

As we can see, the dollar has continued to strengthen this quarter versus other major areas. We see this trend in our Currency Bloc Monitor as well, with the dollar sucking capital out of most major regions:

Consistent with this, we see market pricing in a deflationary environment over the last month. Below, we show our market-implied regime estimates, which use the relative performance of global assets to determine what our markets are pricing in terms of global growth ( +/- G) and inflation (+/-I). Clearly, over the last month, we have seen a pivot towards slowing growth:

Overall, the last month has been when global assets have begun to favor peak inflation narratives- coincident with our economic forecasts that growth and inflation are likely to stabilize at higher levels:

Our fundamental bias still remains that inflation will remain elevated for many economies, but the rate of acceleration has topped out in our view. This is what led us last week to close our commodities preference and pivot towards equities. Particularly, we like the US equity market relative to the rest of the world. If today’s negative price action proves to be transitory, then today could provide a great buying opportunity:

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!