The euro goes up, the dollar goes down, and China devalues the yuan. But what's behind these currency fluctuations? This forex podcast is all about the global currency market. Our three financial market analysts, who are also top Bloomberg forecasters, discuss macro-economic news and its effect on the global financial market - providing you with insights to make informed decisions. *The information contained in this podcast does not constitute a recommendation from any Ebury entity to the recipient.
S2E15: Why is the Brazilian real underperforming its emerging market peers?
The Real remains one of the most volatile emerging market currencies that we cover, with levels of implied probability that exceed just about all of its regional peers. BRL sold-off aggressively at the start of the COVID-19 pandemic, falling to a record low of around 5.9 to the US dollar. The currency stabilized in the second half of last year and has largely held its own versus a broadly stronger dollar in most of 2021 so far.
It has, however, sold-off again in the past 3 months or so - down around 10% since the end of June. This makes the Real the worst performing currency in the EM spectrum during that time, despite the ongoing interest rate hike cycle from the Central Bank of Brazil - which has raised rates by 425 basis points since March.
S2E14: Calmer waters heading into a big week for the Fed and German elections
Investors appear slightly torn between renewed optimism surrounding the pandemic and concerns surrounding the recent stagflation narrative, whereby many economic areas are seeing rising consumer prices, coupled with slower growth. Following the recent sharp increase in US inflation and robust labour market performance, investors have braced for an announcement that the Fed will soon begin tapering its large scale quantitative easing programme at some point this year. Also Germans will head to the polls on Sunday 26th September, and we’re set for a fairly significant political shift, because after 16 years in office, Chancellor Angela Merkel will be stepping down as Germany’s leader.
S2E13: Mixed tones from the latest FOMC policy meeting & what to expect from the next two months
Listen to what our analysts have to say about the latest FOMC policy meeting and what they expect from the financial markets in Augusta and early September.
S2E12: Emerging market currencies wobble as Delta spreads
It is been a period that has been largely characterized by ‘risk off’ trading. If we look at the FX performance tracker for the past month, the three best performers in the G10 have been the traditional safe-havens. The swiss franc, Japanese yen, and US dollar - in that order. Meanwhile, the higher risk currencies, including the Norwegian krone and Australian dollar, have largely underperformed.
This has a lot to do with the aggressive spread of the delta variant of the COVID-19 virus around much of the world. We’re seeing relatively sharp increases in infection in many nations, including some of the major ones. The real cause for concern is the sharp uptick in contagion witnessed in those nations that have so far lagged behind in vaccinations.
S2E11: How did the US nonfarm payrolls report impact the FX market?
We’re going to start this episode by talking about Friday’s nonfarm payrolls report - the impact it had on the market and our general thoughts I guess on the strength of the US labour market.
Most currencies, particularly the major ones, spent much of it within rather narrow ranges amid a lack of significant newsflow. On Friday, however, we did see some volatility following the release of the monthly US nonfarm payrolls report.
S2E10: What's next for the currency market after the Fed meeting?
We had said on this podcast two weeks ago that we thought the Fed would likely take on a less dovish stance in light of rising inflation and the strong recovery in the US economy. That was indeed the case, and in fact the bank surprised most of the market by signaling it is becoming increasingly concerned with the aggressive increase in US prices.