The concept of stability in the Chinese currency has been of great interest to investors, especially since the introduction of the People’s Bank of China’s (PBoC) preferred measure of CNY strength, the ‘CFETS index’. As it stands, the official stance of Chinese policymakers is to manage the bilateral exchange rate versus USD such that CNY …read more
2018 was a tough year for the EUR/USD exchange rate. After a false start in January, the euro fell from its high of 1.25 versus the dollar to 1.14 by year end. The pair had to contend with a number of pressures including an up-rating of the market’s expectations around US monetary policy, US-centric trade …read more
The importance of responsible investing has been growing rapidly, but currency’s unique role has so far gone largely unnoticed. As Record announces that it is seeding an innovative ESG currency strategy, we ask: how exactly does currency fit into the existing ESG investment landscape? We argue that ESG currency investing can be used to incentivise …read more
The Turkish lira came to the forefront of investor attention in August 2018, having at one stage depreciated more than 40% in spot terms against a basket of G4 currencies. This is the largest depreciation seen in our Record EM Currency universe since the sell-off of the Russian rouble in 2014 during the Crimea Crisis. …read more
• 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 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
Does the collapse in the participation rate represent slack, or just demographics? How many can be brought back in to the labour force? We present a detailed dissection of the American population ‘not in employment’, and the reality of getting them back to work.
The US dollar is at an inflection point. Can the dollar’s cycle continue in the face of convergent economic fundamentals and central bank coordination?
In response to almost a decade of QE and with little discernible effect, central bankers have resorted to negative interest rates. What is the zero lower bound and will below zero rates have the desired effect?
If negative interest rates fail to halt deflationary momentum, could more extreme options such as ‘helicopter money’ be a viable next step?
• The labour share of GDP appears to be an important catalyst in the workings of the Balassa-Samuelson effect.
• Understanding it can allow us to better infer currency valuations and the rate at which productivity growth translates into exchange rate appreciation.
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