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Q4 2023 Global Currency and Macroeconomic Outlook


Millennium Global is pleased to share its latest quarterly Currency and Macroeconomic Outlook.

This outlook shares our 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.


  • We expect US growth to slow as the economy digests a fading fiscal impulse, tighter credit conditions and higher oil prices along with a government shutdown and auto strikes
  • We expect inflation to fall via shelter, food and labour market rebalancing, but the pace of core disinflation should slow
  • We continue to believe in a US soft landing given the progress already made in bringing down unit labour costs. The Fed have  also signalled they are nearly done despite strong growth forecasts
  • Higher back-end yields are a symptom of a higher interest rates, large deficits and QT. We now think the Fed are done with their interest rate hiking cycle given the feedback loop from tighter financial conditions
  • In Europe, we expect growth to be in recessionary territory, helping disinflation continue. This raises the risk that the ECB overtightens monetary policy at the expense of undershooting the inflation target in the future
  • We see progress in Japanese “reflation” and expect Japan to exit yield curve control in Q4. Disagreement amongst the committee about the sustainability of inflation suggests they will not raise interest rates until sufficiently convinced. We pencil in Q2 next year
  • We continue to have a pessimistic structural view on China given various headwinds, but cyclical growth is improving. We still expect inflation to remain low and monetary policy to retain a small easing bias
  • The market has come around to our long-held view of a soft landing and higher US rates (both in the front and back end) have helped push the dollar higher
  • Our message is to pare back dollar longs here. We now see the rates and commodity support which pushed the dollar up fading
  • As US yields stabilize, this should generally be supportive of risk assets, though we bear in mind that valuations are  challenging
  • Overall we stay neutral the dollar, DXY(0) given decent carry and the weak outlook in Europe which points to little US-European growth convergence
  • Our view that US yields can stabilize and give equity & commodity risk some respite, generally supports G10 cyclical FX such asAUD (+), CAD (+) and NOK (+) which also offer more value than European FX
  • We downgrade the European complex (GBP, EUR and CHF) further to negative (-) as developments in growth and inflation warrant faster cutting cycles than generally priced and for the likes of the SNB, a more relaxed approach to the currency (less in favour of FX strength)
  • Our view that “higher for longer” is now well priced results us downgrading the yen to neutral, JPY (0), as FX intervention and valuation risk generally points to risk-reward being long yen
  • Higher US yields have providing a better entry for carry strategies: we like LatAm, including BRL (+) where real rates remain high. We also like MXN (+) and KRW (+) in the EM space
  • Finally, though cyclical growth is improving in China, the interest rate differential versus the US is still negative and the flow picture remains poor. We are negative CNH (-)

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This piece of content  contains the views and opinions of our Global Economic Research and Strategy Team as of 5th Oct 2023 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, not 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 here.

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