An HSBC research note in late July raised the prospect of growing unease in the foreign exchange market amid increased cases of the Delta variant of Covid-19 and uncertainty around growth rates in many parts of the world.
This has manifested itself in a variety of ways, including underperformance of cyclical currencies such as AUD and NOK and some softening of emerging FX, especially in Asia.
The influence of interest rates has taken on greater importance
Paul Mackel, HSBC
HSBC’s global head of FX research, Paul Mackel, says that unlike in 2020 – when FX was very sensitive to the ebb and flow of risk appetite – markets are now increasingly thinking about the outlook for monetary policy.
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