Market risk events come in all shapes and sizes, originating from unique sources of uncertainty. We've seen them all - valuation bubble unwinds, mortgage credit crashes, Fed policy shocks, even the shutdown of the US economy from Covid. Over the last month, investors have been forced to confront a new risk, that of the imposition of substantial tariffs by the US on its trading partners. With this in mind, it was great to welcome Steven Englander, Global Head of G10 FX Research of Standard and Chartered Bank, back to the Alpha Exchange. Our discussion begins with Steven's assessment of the setup coming in to 2025 and that was one in which the market was long dollars in anticipation of the Trump agenda.

We next talk about balance of payments identity math and how it is difficult to solve simultaneously for a lower trade deficit, higher direct investment from abroad and lower US interest rates. He suggests, however, that the speed with which asset prices moved in March and April, have complicated the decision-making process for investors thinking about making investments into the US. We next explore the factors driving the dollar lower. Here, in addition to noting that implied Fed cuts have increased by 50bps over the last month, Steven also suggests that a risk premium may be assigned by foreign investors to US assets. He points as well to pessimism about the US economy, noting that this is not yet showing up in the hard data.

There's much more to learn about Steven's framework in our discussion, which I do hope you enjoy.