Currencies

Q3 earnings commentary has been broadly positive, despite intensifying macro headwinds. Going forward, a negative growth outlook and geopolitical risks, are a threat to buoyant earnings expectations. We project that earnings growth for 2024 will move lower than currently projected - a negative for equities. This Santa Claus rally is unlikely to be the start of a new bull market.

In this report, we go around the globe and survey the near-term outlook for G10 currencies. Our longer-term view on the dollar has been clear, we are sellers. In this report, we review if a tactical sell is also warranted given incoming data and the message from our models.

Labor markets are softening in most developed economies, as is usually the case in the lead-up to recessions. Our base case is that the global recession will begin in the second half of 2024, but we will be monitoring our MacroQuant model on a daily basis for confirmation.

Following the October US jobs data, the ‘Joshi rule’ real-time US recession indicator increased from 0.11 to 0.15, meaning that it is fast approaching its event horizon of 0.20. We go through the investment implications. We also highlight a new long-term recommendation. Plus, the Norwegian krone is close to a potential rebound.