We discuss the impact of recent geopolitical developments on FX markets. The euro bloc is the most vulnerable, while the dollar and commodity currencies are more insulated. We are recommending shorts in EUR, GBP and SEK vs. longs in USD, CHF and G10 petro FX. Deterioration in risk sentiment would usually be more JPY-supportive, but higher energy prices are an offset.

We also discuss the main take-aways from our FX models. The growth and market regimes have turned outright defensive, and risks to the dollar are skewed asymmetrically stronger. Models were already short EUR to begin with, but magnitude of shorts have increased on growth revisions.

Speakers

Paul Meggyesi, Global FX Strategy

Meera Chandan, Global FX Strategy

 

This was recorded on March 7, 2022.

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