Multi Strategy Currency – November 2018

During the month of November, geopolitical events dominated the driving forces behind the financial markets. Global markets positioned themselves to follow suite with a clear ‘risk-off’ sentiment. The catalyst towards this shifting market dynamic away from risk assets, originated from the hostile approach to global trade. This fast moving trading environment gave volatility to multi strategy currency programs. As over the course of the last 18 months, the implementation of trade tariffs has suffocated global commerce. The meeting however between the US and China’s heads of state at the G20 summit did manage to de-escalate tension.

There were plenty of other political events for investors to digest in November. One of these events centered around the Brexit negotiations. During the political talks in Britain, a withdrawal agreement was agreed between the UK and the European Union (EU). There are however, many politicians and investors alike who are sceptical on a probable outcome of the deal at hand. As a consequence, this confusion has spilled over into the financial markets adding unwanted volatility. The presence of global trade tensions, as well as sliding macro-economic figures were the norm for multi strategy currency programs.

Continued Geopolitical Tensions

The geopolitical events had a direct impact on the currency majors. Within Europe the tensions between Brussels and Italy persisted. This became evident with the European Commission rejecting the recent Italian budget law. As a consequence these disruptions created unwanted volatility in the currency markets. Multi strategy currency programs depended upon a broad diversification approach to navigate the market swings. In addition to the European tensions, a convergence of dovish FED expectations also pressured the currency markets. Therefore the dollar lost support as it declined against the broader market. In Asia however, the losses were greater for the Chinese yuan as was hit harder posting weakness against the dollar. Meanwhile a clearer Brexit picture in Europe supported the euro.