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16 Aug 2013
Flash: Paradigm no longer 'risk-on/risk-off'; trade the cycle? - HSBC
FXstreet.com (Barcelona) - Markets are enjoying a relatively ‘normal’ quiet summer, notes HSBC FX Team, with the prospect of modest economic improvements in western industrial economies "may ultimately lead to a ‘normalisation’ of monetary policies after years of unprecedented monetary accommodation" the Bank comments.
Key Quotes
"The markets are searching for a paradigm to replace it the 'risk-on/risk-off'. It is clear that ‘carry’ which was probably the dominant theme in the pre-crisis years between 2004 and 2007 is not yet set to make a comeback.
"markets are perhaps looking to ‘trade the cycle’, trying to anticipate relative economic recovery prospects and their implications for yields and policy. This implies a focus on the incoming economic data, so surprise indices are likely to be important."
"However, despite the market’s recent focus on the prospects for Fed tapering, there is not yet strong evidence that this theme has started to dominate. This may change once market activity picks up again in September, but for now local news may be more important than global developments in driving FX rates."
Key Quotes
"The markets are searching for a paradigm to replace it the 'risk-on/risk-off'. It is clear that ‘carry’ which was probably the dominant theme in the pre-crisis years between 2004 and 2007 is not yet set to make a comeback.
"markets are perhaps looking to ‘trade the cycle’, trying to anticipate relative economic recovery prospects and their implications for yields and policy. This implies a focus on the incoming economic data, so surprise indices are likely to be important."
"However, despite the market’s recent focus on the prospects for Fed tapering, there is not yet strong evidence that this theme has started to dominate. This may change once market activity picks up again in September, but for now local news may be more important than global developments in driving FX rates."