10 Jun 2013
Flash: The FX market has shaken off the shackles of risk on-risk off - HSBC
FXstreet.com (Barcelona) - Risk on – risk off no longer has a grip on the FX market, either in terms of G10 or emerging markets, says the HSBC FX team, led by David Bloom, his head strategist.
According to David and his team, "currencies are now able to behave independent of the fickle vagaries of 'risk on - risk off', allowing them to reassert their distinctiveness from other asset markets in many instances."
HSBC argues that part of the explanation for this de-link between currencies and RORO is the global currency war, with markets realizing it is practically an illusion to compete against central bank appetite for a weaker currency, David says. Instead, markets are playing now a game of guessing what this might mean for equity and bond markets, Bloom adds.
Overall, Blooms concludes that "the world of FX has shaken off the shackles of RORO, allowing it to express itself more fully and do its own thing." This, according to the analyst, "is an independent streak that offers opportunity."
According to David and his team, "currencies are now able to behave independent of the fickle vagaries of 'risk on - risk off', allowing them to reassert their distinctiveness from other asset markets in many instances."
HSBC argues that part of the explanation for this de-link between currencies and RORO is the global currency war, with markets realizing it is practically an illusion to compete against central bank appetite for a weaker currency, David says. Instead, markets are playing now a game of guessing what this might mean for equity and bond markets, Bloom adds.
Overall, Blooms concludes that "the world of FX has shaken off the shackles of RORO, allowing it to express itself more fully and do its own thing." This, according to the analyst, "is an independent streak that offers opportunity."