Waiting to board (pg 2)

The USD has been speeding ahead this year, leading many to question whether they are on the wrong track. We still expect a modest USD decline in the months ahead, as the global economy gains momentum. The US economy is in the driver’s seat, but US exceptionalism should only become important if it drives an exceptional monetary policy response. Delays are frustrating, but a sustained USD recovery is premature.

IMF FX reserves (pg 6)

The IMF updated its quarterly COFER data, and the USD’s share of global reserves hit a new low in Q4 2020. The EUR was the biggest beneficiary and gained the most share in Q4, but the JPY and RMB also gained. While the USD share of the total continues to drop, reserve managers once again accumulated USD during Q4.

GBP: Swimming against the current (pg 10)

GBP has capitalised on expectations of a robust cyclical upswing, but we believe this looks increasingly priced-in. Likewise, the UK’s early vaccine gap is set to narrow as other nations ramp up their vaccination campaigns. If the cyclical supports fade in allure, GBP bulls may be vulnerable to a renewed focus on the sizeable UK twin deficits.

NOK & SEK: Full steam ahead – A tale of two Scandies (pg 15)

Monetary policy divergence is likely to become more important for FX as the year goes on, and the risks are biased to the Norges Bank hiking earlier. The NOK should outperform the SEK,and we see EUR-NOK and EUR-SEK at 9.40 and 9.80 respectively by year-end.

Gold: Yielding but not turning (pg 24)

Gold has been undermined by rising US yields, but the underlying monetary and fiscal accommodation remains supportive. The biggest threat is a further rise in yields and ETF liquidation, but financial instability, USD weakness, and geopolitical risks are all potentially bullish. We lower our average 2021 gold price forecast to USD1,830/oz.

Digital currencies: What are they and why do they matter? (pg 26)

As cash usage declines, new forms of digital money are emerging. We look at cryptocurrencies and Central Bank Digital Currencies and outline the impact they could have on the economy and policy decisions.

FX Market: March 2021 (pg 40)

For those who are looking for a review of what happened over the last month, we present a market review of March. We consider the main drivers and key events that moved markets