Global FX Monthly – Views You Can Use

September 14, 2022 - 1 Minute
Close up of a US One Hundred Dollar Bill
The SEC recently backed the listing of several single-stock ETFs, many of which gained traction thanks to retail investors. In some cases, these products are attached to big-name stocks, which helps daily trading volumes climb steadily, and translates to success across North America. With more than 35 single-stock ETFs lining up for approval, many investors and industry.

What's the view over the next month?

The global backdrop remains supportive of continued USD strength, especially against the likes of EUR and GBP. The one caveat is that there's scope to selectively lean against the USD in pockets of EM/G10. EM has outperformed G10 recently, and prospects of peak inflation and Fed terminal rate pricing have provided some carry interest. It's too early to pile into carry, given growth worries and macro volatility, but we do see value in some places, like being short EURMXN.

Market Themes: Diverging financial conditions, recession risks, FX vol

We see three market themes ahead:

  1. Inflation and Fed terminal rate pricing: There is growing evidence that inflation is peaking, which should ease macro vol as terminal rate exploration starts to ease. It's still too early in that process to declare victory, leaving markets focused on upcoming data releases.
  2. Regional growth variations: China and European growth remain wobbly, where the latter sits at the whims of the winter weather season.
  3. Ongoing terms of trade shock: While commodity prices have seemingly peaked, for Europe, the local terms of trade shocks continue to pass through to the growth outlook. In turn, regional divergences will be a key FX theme through Q4.

FX forecast updates, market factors, and macro model suggestions

We upgraded our USD forecasts, maintaining EUR and GBP weaknesses through Q4. That dovetails with performance across our Macro Ranking Scorecard Index overlay strategies, where the terms of trade and growth factors have dominated performance over the past 6m, and EUR, GBP score poorly. We also like leaning against JPY strength, especially against European crosses, as a hedge to peak inflation, growth wobbles, and relative terms of trade.

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Headshot of Mark McCormick


Director and Global Head of FX Strategy, TD Securities

Headshot of Mark McCormick


Director and Global Head of FX Strategy, TD Securities

Headshot of Mark McCormick


Director and Global Head of FX Strategy, TD Securities

Headshot of Mazen Issa


Director and Senior FX Strategist, TD Securities

Headshot of Mazen Issa


Director and Senior FX Strategist, TD Securities

Headshot of Mazen Issa


Director and Senior FX Strategist, TD Securities

Headshot of Ray Ng


FX Quant Strategist, TD Securities

Headshot of Ray Ng


FX Quant Strategist, TD Securities

Headshot of Ray Ng


FX Quant Strategist, TD Securities

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