Charles Dumas, Chief Economist at TS Lombard.
- Dollar near past real highs – could relapse later this year
- Pound and yen both undervalued – likely to stay that way
- China’s yuan overvalued – no major move till autumn congress
- Euro still undervalued – may rise sharply when ECB tightens
- Current account balances now matter – yen safe haven in 2018
- China’s debt soaring but not yet dangerous – growth to slow
- Japan’s high debt rising inexorably &nd...
With the prospect of a June referendum hanging over the markets, interest in Brexit trades has heightened. There is currency-market evidence showing that speculative investors have been positioning for a possible Brexit principally in the FX options markets. Indeed, a chunk of decline in sterling during late December and January may be related to the build-up of option-market positioning, since spot market positioning indicators do not show evidence of extreme short positioning so far (see chart above). Our central view is that sterling will remain the main shock-absorbi...