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(H2) Stabilising


Bias Still Points Lower


Fading Onto Recent Gains


Tsy/Eurodollar Roundup


Remains Above Support

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RBC note that they will start 2022 as they started 2021, “with a positive stance on USD and long DXY position. With the consensus less skewed against us now and after a year of solid USD gains, we set clear exit criteria for this trade. Central bank credibility and higher rates underlie this view, but we expect increasing questions on the credibility of UK policy and are short the overvalued GBP against CAD. As G10 rates diverge, carry will start to re-emerge as a plausible strategy and we are long NZD/SEK on this and rate dynamics. Expect EUR to also start scaling up the ranks of funding currencies and behave more like a safe haven. In EM, BRL has early-mover advantage on tighter policy and attractive valuation. We are long vs ZAR, contingent on Brazil's budget approval by December 31. More concerned on election risk in Colombia than Brazil, we are long USD/COP. CZK is our pick from within CEE and we are short EUR/CZK as CNB will hike beyond expectations and clearly favours a stronger currency. We expect greater tolerance of CNY appreciation and express this by proxying the CFETS basket. We express a similar view on MAS through the SGD TWI. Finally, we fund long positions in IDR and MYR by shorting EUR and AUD.”

  • To summarise, their thematic trades going into 2022 are as follows:
  • Long DXY (exit conditions include: repricing of Fed forward rates & sustained outperformance of EUR equities vs. U.S. equities)
  • Short GBP/CAD
  • Long NZD/SEK
  • Short 1-Year EUR/JPY vol; long 1-Year EUR/CAD vol
  • Long BRL/ZAR
  • Long USD/COP
  • Short EUR/CZK
  • Long CFETS CNY basket
  • Long MYR, IDR vs EUR, AUD
  • Long SGD TWI
  • Long USD/CAD (technical trade)