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Barclays sees value in EUR, NOK, ZAR, CLP puts in US no-landing scenario

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  • Barclays write that resilient US macro data may make markets worry less about whether the landing will be hard or soft, and more about whether there will be a landing at all. They identify currencies at risk if the Fed defers rate cuts, and update our hedging metrics. ZAR stands out as a good short.
  • They model a tail scenario in which US growth remains robust, rather than stalling or moderating, which shows considerable value in hedging this risk in out of the money puts for EUR, NOK, ZAR and CLP.
  • Relative to their prior research, high-yielders in CEE and LatAm have become less expensive to hedge. It may still be worth paying carry to hedge tail moves in ZAR and BRL given historical risk distributions.
  • They see GBP among the most mispriced currencies - which is one of their key bullish views. They see the currency as remaining very cheap as markets assign near-zero probability of fair value convergence. At the opposite end, they are fundamentally bearish on CZK, ZAR and CHF.
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