G10 FX outlook in the wake of Brexit - TDS

Research Team at TDS, suggests that the Fed, China, and commodity rebalancing helped characterize the price action in G10 FX markets in H1.

Key Quotes

“The broad USD, for its part, slipped 4% over the first six months, trailing gains in JPY, CAD, and NOK. Notably, the JPY rallied 17%, outstripping the rest of the G10 by nearly 10% and marking its best six-month performance since 2008. Positive real rates helped the antipodeans outperform while European currencies lagged during the first half of the year.

Looking forward to H2, we see a mix of the old drivers as well as some new ones that should catalyse markets. Indeed, we still think the Fed, China, and commodity fundamentals will drive price action in the second half but at the same time, we believe political risks will also dominate in the G10 markets in coming months. The outcome of the UK Referendum will continue to fester behind the scenes, especially given the lack of clarity and direction for European politics over the next year. US politics will also take centre stage in H2, redirecting the market focus yet again on political, idiosyncratic risks.”