The UK’s general election on 8th June resulted in a surprise hung parliament. In this blog post, we explore the implications of this for the UK government and the Brexit negotiations.
About Joe Spearing
Joe Spearing is a senior research analyst at Record Currency Management. He graduated with a BA (First Class) in Philosophy, Politics and Economics from Balliol College, Oxford in 2015. Outside work, he is a volunteer for the charity Education Partnerships Africa, and enjoys running and attempting Mozart’s easier piano firstname.lastname@example.org
Entries by Joe Spearing
On 6th April, the Czech National Bank (CNB) announced an end to their currency floor
The market reaction was muted by comparison to that in the response to the collapse of the EURCHF floor in 2015
We analyse the differences in economic fundamentals and central bank policy which allowed this much smoother exit from a currency floor.
• On 22nd February, Finance minister Gordhan presented his annual budget to the national assembly.
• Gordhan faced a painful trade-off between managing South Africa’s eye-watering debt situation, supporting stagnant private consumption and political sustainability in the most unequal country in the world
• We simulate South Africa’s debt/GDP path under different assumptions, and argue that the economy still has a long way to go to achieve fiscal sustainability
• Strategies for earning sustainable return in currency are more nuanced than in equities or bonds due to the absence of a “long-only” beta
• We argue that there are, however, strategies to target sustainable returns in the currency space
• This blog post describes growth, carry, momentum and value as potential sources of return in currency
• 11th January saw data on Turkey’s November current account released
• The drop off in the trade balance can be largely explained by FX effects and continued decline in Tourism revenues
• A careful analysis suggests that in the detail might be some much-needed good news for Turkey
In April we noted the uncertainty that a Brexit vote would bring to the British economy.
In this post, we examine how the economic risk the UK now faces may be manifested in a post-Brexit UK. In particular, we look at a “worst case scenario”, and what this might mean for the economy, and the currency.
Following the attempted coup in Turkey on 15th July, we examine afresh the pressure points in the Turkish economy, and note three themes investors will be watching with interest.
Carry exists across all asset classes as compensation paid to speculators for assuming market risk.
We argue that, as in equities, bonds, and currency, the carry trade in commodities represents a persistent source of beta-like returns.
The currency war “truce” at the G20 meeting in February of this year has effectively placed political pressure on Japan to refrain from further depreciation of the yen. We investigate whether this has frozen USDJPY at its “fair value”. Although a naïve reading of PPP figures suggests that the outcome is reasonable, adjustment for productivity differentials suggests that the yen is now heavily overvalued versus the dollar, with attendant negative consequences for the Japanese economy.
The uncertainty associated with the outcome of the referendum on Britain’s EU membership is already affecting financial markets and the wider economy. By examining the pricing of derivatives, we can identify the price the market is putting on this uncertainty, and what movements in currency are expected between now and the referendum itself.