Capital Flows

Historically, carry trades have generated very large profits with limited volatility. Since 2008, this has not be the case. Going forward, carry trades should continue to underwhelm.

Sterling has come under intense pressure since PM Cameron announced date of the EU referendum. Our bearish view on the British pound has not been based on a forecast of U.K. succession from the EU.

China's capital outflows since last year can be broadly grouped into three categories: reduced foreign inflows (and accelerated outflows), domestic firms deleveraging dollar debts, and domestic entities increasing dollar assets. Barring an extreme scenario, the PBoC should have more than enough ammunition to defend the RMB, should it opt to.