Q2 2022 Global Currency and Macro Outlook

Millennium Global’s flagship economic research piece is now available to download, and for the first time is summarised in a short webinar presented by Richard Benson, Co-Chief Investment Officer, and Piya Sachdeva, Lead Economist.

The Macro and Currency Outlook shares the Millennium Global economics and strategy teams’ views on the macro themes that will matter most in the coming quarter and how these are expected to impact global currencies.

Please click here to watch the recording or scroll down to download the document.

Economic themes that will matter in the coming quarter

In our assessment global growth is set to slow but should remain at high levels while inflation should peak in the next quarter.

The Russian invasion of Ukraine supports commodity prices and tilts the outlook in a more stagflationary direction, adding downside risks to European growth

The US Federal Reserve has signalled its rate hiking cycle is set to continue with 50bps rises on the table in the near term. Given the outlook for slower growth and inflation, we see current market pricing as more than prudent at 8 hikes over the next year with 2 x 50bps hikes in the next four meetings

Higher commodity prices should see Emerging Market central banks extend the last leg of their hiking cycles.

Renewed covid restrictions, along with slower export growth and softness in the real estate sector should see Chinese activity slow further. Inflation is set to remain low, keeping authorities with a mild easing bias

Our view on how this will impact Foreign Exchange

Slowing but robust global growth, a relatively supportive Developed Market versus US growth differential and high bar for the Federal Reserve to overdeliver leaves us constructive on risk with a weak US dollar bias.

We prefer to express this view via long Norwegian Krona, Australia Dollar and Canadian Dollar exposures as higher commodity prices support the growth outlook and terms of trade allow these central banks to become more hawkish

We like selective Emerging Market foreign exchange (Brazilian Real, Mexican Peso) that are not only very cheap but supported by hiking central banks, high nominal rates and relatively strong, improving external positions

Uncertainty around the evolution of the war in Ukraine provides large risks around the European growth and European Central Bank outlook, leaving us neutral EURUSD

The views of the Millennium Global’s economics and strategy team are a key input into return-seeking and dynamic hedging currency programs that we manage for institutions globally. Our quarterly macro and currency outlooks therefore provide perspective on how we aim to generate returns for clients and to protect against downside risks for clients that have asked us to manage existing currency exposures.

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This piece of content contains the views and opinions of our Global Economic Research and Strategy Team as of April and does not necessarily represent the views and opinions of Millennium Global or any of its Portfolio Managers. This information is intended for Professional Clients only. Millennium Global does not target retail clients. This information does not constitute an offer to buy or a solicitation of an offer to sell and does not constitute an offer or solicitation in any jurisdiction in which such a solicitation is unlawful or to any person to whom it is unlawful. For further information please see Important Disclaimers on:  https://investments.millenniumglobal.com/marketing-disclaimers