2018 has been an eventful year, with an ongoing trade war, tightening monetary policy from the Federal Reserve, increasing pressure in the Brexit negotiations, and a new Italian government which has resurrected fears about the stability of the Eurozone Despite this, G10 FX volatility has remained remarkably subdued In this blog post, we construct an econometric model to …read more
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 email@example.com
Entries by Joe Spearing
The case for investing in emerging market currencies remains strong, despite the recent volatility. A combination of rising US rates, concerns about the stability of the global trading system and local political turmoil have generated headwinds for EM currencies. However, the recent sell-off has considerably boosted return expectations given the current level of undervaluation in …read more
• The Turkish lira was one of the more volatile currencies in 2017.
• High inflation, a central bank apparently hobbled by political resistance to higher rates and persistent political jitters were key factors which made the currency vulnerable.
• In this post we take a closer look at the balance of payments to ascertain whether risks have increased over the last year.
• As NAFTA negotiations become increasingly fraught, the risk of a complete termination by US President Donald Trump is increasing
• The long-run impact of such a termination is likely to be limited, based on the MFN tariffs the US could apply
• The most likely impact would be in terms of the real economy, as the shock generated would hit consumption, spook investment and delay the Bank of Canada’s hiking cycle.
• To investigate the magnitude of this effect, we model the impact on real economic variables and interpret the impact on the Canadian dollar. Our results suggest that a 6% depreciation of the Canadian dollar against the US dollar could be justified.
• The euro has been very strong this year (appreciating over 10% YtD against the dollar)
• Fair value (measured using PPP) is 1.33, suggesting the EURUSD pair is still around 15% undervalued
• In this blog post we use a FEER (Fundamental Equilibrium Exchange Rate) framework to investigate what level exchange rate is consistent with a sustainable balance of payments. Our results are broadly consistent with PPP valuations, and suggest that there is a risk of further euro appreciation to come
The Bank of England’s chief economist Andy Haldane suggested recently that changes in labour market structure in the UK have led to a flattening of the Phillips Curve
In this blog, we discuss the plausibility of this argument applied to a global context over a longer time horizon
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.
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