Markets After The Brexit Vote: Opportunities On 1-3 Month Horizon - Goldman Sachs
I think no one can preditc what will happen in the e next few months..
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This FX Views gives our tactical assessment post referendum, meaning opportunities on a one to three month horizon.
First, “divergence” in fundamentals is alive and well, meaning that the US is outperforming – by a large margin – Europe and Japan on activity and inflation. But G-3 central banks are preventing this from feeding into exchange rates, which means that, like in “whack-a-mole,” this should show up in stock market and breakeven inflation outperformance of the US versus Europe and Japan.
Second, a dovish Fed means emerging market carry is attractive, as our EM strategists have argued. Their favorite expression of this is a relative value set-up where RUB, IDR and INR are on the long side and KRW, THB and MYR are on the funding side. This relative value set-up steers away from currencies exposed to continued China deleveraging and provides some insulation if there are changes in Fed communication or a positive surprise in payrolls on Friday, where our US team is above consensus (210k versus 175k consensus).
Finally, there is the RMB. In recent weeks, the fix has weakened over one percent against the Dollar, while the 12-month NDF prices just 2.7 percent in the coming year. We turned RMB-bearish, after being more-constructive-than-consensus, fairly recently. Now is the time to hedge.
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