RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Currencies

Currency Wars Ahead

Posted 07/19/2019 8:25AM CT | John Caruso

Global Central Banks, specifically the FOMC and ECB, are racing to offset an avalanche of slower economic growth ahead via rate cuts and dovish lingo – what currency arbitrage might benefit the best? We ultimately believe that the U.S. Federal Reserve wins out in the end with a weakening USD and perhaps an aggressively weakening USD at that. With the benchmark U.S. 10-yr note yielding a historically paltry 2.05%, it’s still one of the highest yielding government bonds globally. Comparatively speaking, the German 10-yr bund yields -0.32%, France -0.068, Japan -0.133% (I could go on), which means on a rate of change basis, the Fed has the most room to pull down US interest rates aka lower borrowing costs which ultimately leads to a devaluing of the U.S. Dollar. One currency we believe will ultimately win by default due to a dovish U.S. Fed and dovish ECB, is the Swiss franc. Without the peg to the euro, we believe the Swiss will be a top currency for flight to safety measures with declining global bond yields. Our quantitative signal in the CHF/USD went bullish trend at the beginning of June, and is likely to continue thru year end and into 2020.

Swiss Franc Sep ’19 Daily Chart

Swiss Franc Sep '19 Daily Chart

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John Caruso

Senior Market Strategist
Follow John on Twitter @JCarusoRJO. John began his career at Wilshire Quinn Capital, a Wealth Management Firm based out of Los Angeles, California. Prior to becoming a broker he did some individual trading on his own, where he first began to study and interpret different market strategies and ideas. In 2006 John moved over to Lind-Waldock where he began to service clients as a professional broker. He joined RJO Futures in 2011.
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