For the sixth time, we present our year-end FX Top Trades for the coming year. In the years 2010-14, our FX Top Trades delivered an average return of 2.42% with an average hit ratio of 72%.
This year's publication is based on four themes that we think will drive FX performance in 2015. The themes are (i) Recovery and divergence, (ii) Currency war, (iii) Monetary policy surprises, and (iv) Oil price recovery.
We are bullish on global growth in 2015, which should support carry strategies. However, local business cycle misalignments limit the set of attractive signals and in particular we find that SEK and PLN are vulnerable to negative growth and monetary policy surprises.
Currency war is the next step for central banks as inflation undershoots. The BoJ, SNB and CNB are leading the pack but risks to short JPY trades have increased. Instead, CHF has regained the status as our preferred funding currency.
We expect oil prices to recover in 2015. This should favour oil exporting currencies, for example, the RUB, NOK, CAD, MXN and BRL. On a relative basis, the CAD and BRL could lag behind the others due to the current low price level.
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