August 5, 2019

4X Global Research Forecasting Track Record

BY Olivier Desbarres

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( 9 mins)

4X Global Research (4XGR), a fully independent yet well connected London-based research consultancy, has since its inception in 2016 consistently posted a strong forecasting track record for currencies, rates as well as macroeconomic and political developments which is detailed below.

This underscores its rigorous top-down approach, rooted in both a detailed qualitative assessment of emerging and G20 fixed income markets and economies and innovative quantitative analysis of macro and market data, trends, policy decisions and global events.

 

4XGR’s topline forecasts include:

 

Developed and emerging market currencies

 

  • Sterling weakness in Spring 2017 (Brexit), limited gains following signing of Withdrawal Agreement (WA) in November 2018 (weak UK growth, uncertain parliamentary approval of WA, neutral Bank of England), appreciation in Q1 2019 (receding risk of “no-deal” Brexit), stability in Spring and depreciation in past month ( “no-deal” Brexit concerns, more dovish BoE and unfavourable Sterling seasonal pattern).
  • Korean Won outperformance in June 2019 (second best performing Asian currency after Thai Baht).
  • Renminbi depreciation in the summer of 2018, appreciation in early 2019, stabilisation in March-April and finally depreciation in May-August in a repeat of the currency’s pattern in summer 2018.
  • Non-Japan Asian currencies’ resilience in early 2019, thanks to sharp fall in global energy prices in Q4 2018, stimulative growth-policies in NJA and central banks’ monetary policy stance (GDP-weighted basket of NJA currencies ex CNY, remained in narrow 1.2% range vs USD in subsequent 3 months).
  • Dollar rally in June 2018, support for Dollar in Q4 2018 but vulnerability heading into 2019 (Dollar NEER depreciated 2.3% from mid-December 218 to mid-January 2019 to a 15-week low).
  • Limited contagion from collapse in Turkish Lira in August 2018 to EM currencies overall.
  • South African Rand weakness in summer 2018 as a result weak GDP growth, SARB’s unwillingness to tighten monetary policy via rate hikes or FX intervention and idiosyncratic risk of land appropriation.
  • Norwegian Krone comeback in early 2018 (Krone was best performing major currency in Q1 2018, with NEER appreciating about 5%).
  • Euro rally in H2 2017, on the back of receding political risks following French presidential elections, Eurozone’s 2% of GDP current account surplus, pick-up in economic activity and ECB comfortable with Euro appreciation from depressed levels.

 

Central bank policy rate decisions

 

  • Central bank policy rate cuts, which had all but disappeared since Spring 2018, would resurface in second half of 2019 as a result of slowing global growth and inflation (in May-July, central banks of Australia, Chile, Korea, India, Indonesia, Malaysia, New Zealand, Philippines, Russia, South Africa and US all cut their policy rates).
  • European Central Bank, in face of slowing economic growth, delaying planned start to rate hiking cycle from first half of 2019.
  • Bank of England hiking rates only once in 2018, mirroring Fed’s 2016 hiking cycle.
  • Federal Reserve pushing up market pricing of rate hike in run-up to its 20 September 2017 meeting.
  • Reserve Bank of India keeping its policy rate on hold at 7 December 2016 policy meeting, contrary to consensus forecast of 25bp rate cut.

 

Macro developments

 

  • Lagged impact of less stimulative interest rate policies in Q4 2018 dragging already slowing global GDP growth lower in coming quarters and higher international import tariffs driving global inflation even higher and requiring further policy rate hikes.
  • US GDP growth slowing to 3.5% qoq annualised in Q3 2018, based on historical relationship between ISM PMIs and GPD growth, vs Atlanta Fed’s GDPNow forecast of broadly stable GDP growth of 4.1%.
  • UK core and CPI-inflation peaking in November 2017 due to likely fall in imported inflation.
  • Chinese FX outflows in 2016 would accelerate (further rate cuts, slowing economic growth, flip-flopping of policies), putting Renminbi under pressure and forcing PBoC to intervene in FX market (depleting FX reserves) to slow (but not stop) Renminbi depreciation.

 

General elections and Brexit

 

  • 4XGR has so far accurately forecast every step of the post-UK referendum process, including signing of WA, Prime Minister May surviving no-confidence vote, parliament twice voting against WA with record majorities and against a “no-deal” Brexit and in favour of extending A50 negotiations. 4XGR is sticking to its long-held view that UK will not exit EU without a deal and that government will call 2nd referendum.
  • In early 2017 4XGR published a comprehensive four-part guide to April-May 2017 French presidential elections in which it accurately predicted Macron coming top in first round and comprehensively beating Le Pen in second round and subsequent Euro rally (+5% in between mid-May and end-July 2017).
  • 4XGR correctly anticipated that ruling CDU/CSU would win largest number of seats in Germany’s September 2017 general elections but would be well short of a majority in a very divided parliament and that Chancellor Merkel would yet again be forced into an alliance with the SPD.
  • 4XGR correctly predicted European markets’ benign reaction to “no” vote in the Italian Referendum in December 2016.

 

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Testimonials for 4X Global Research

 

I have been an avid reader of Olivier Desbarres macro-economic analysis together with his forward predictions across both emerging and developed markets for two decades now.”

Alex McDonald, CEO at European Venues and Intermediaries Association

 

“Olivier has spent the past few years creating an exemplary new macro research product that pulls from his years of economic experience working for Tier 1 Global Investment Banks. He combines independent thought, with bespoke services that allows the end user to establish an in-depth knowledge of global trends, to correctly interpret economic data within a framework that contains Olivier’s candid analysis.”

Charles Roundell, Caxton Associates

 

“I work in Asian debt capital markets for a global investment bank. While we are well-supplied with good research in-house, I do look for alternative macro views and Olivier has been one of a very few go-to sources for me. I previously worked in the same bank as Olivier and so know his generation of ideas and track record. He thinks well and writes very well – pithily rather than layered in screeds of tedious detail. When there are themes developing, he is quick to hook into those.”

Alister Moss, Managing Director, Debt Capital Markets Syndicate, Hong Kong

 

“Olivier Desbarres’ insights are always enlightening. His approach relies on heavy-duty analysis but his presentation is always clear and his summaries digestible. So often research of commensurate quality is shrouded in over-analysis which makes it unwieldy and renders key messages unclear. Desbarres makes intelligent recommendations in intelligible form.”

Indy Bhattacharyya, Peel Hunt

 


 

4X Global Research

 

www.4xglobalresearch.com

www.4xglobalresearch.com/contact/

[email protected]

Tel: +44 (0)20 3811 0454

 

Olivier Desbarres

[email protected]

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