Global Private Banking the 5% peak rate level that markets around macroeconomic forecasts will for now. We keep our prudent stance on currently price in. We think it is too early continue to generate some FX volatility, KRW, however. KRW could continue to to become negative on USD however, which investors can exploit, while others suffer from the weak technology cycle. as the Fed still needs to implement may look at hedging unwanted USD We see further upside risks for SGD, due additional 100bps of rate hikes and the exposure to lock in and protect gains to strong economic fundamentals and US economy is still relatively resilient made so far. the Monetary Authority of Singapore’s amid a struggling global economy. While EUR and GBP will probably move tightening policy. Outside of Asia, we Moreover, until risk appetite improves sideways, we believe JPY will manage to are constructive on BRL. The country and equities see a more sustainable recover and we move to a bullish view. shows robust economic drivers, and the bounce, the safe haven characteristics Of course, the pronounced weakness currency offers one of the largest real of USD also provide it with some to date is one factor, in addition to the rates among EM. In addition, political downside support. likelihood of further intervention. The uncertainties largely reduced since The mirror image of our USD downgrade yen is also helped by a strong reduction elections have passed. is an upgrade of EUR and GBP to a in investors’ bearish positioning and Despite the recent bounce in commodity neutral view. Both currencies are cheap some volatility in global risk appetite, prices, we do not expect Gold and Silver following the sharp USD rally. But both and this should help compensate for the to outperform in the coming months. are also facing recessions, limiting continued yield disadvantage. USD’s recent strength has weighed the potential for upside. Of course, The cyclical character of AUD means that on both metals, while higher rates and commodity prices play a key role here. it will likely struggle to capitalise on the real bond yields create a competitive European nations are commodity fading USD momentum. AUD also faces disadvantage for gold compared importers, and the recent rise in oil and domestic risks given the rapid tightening to cash and bonds. Oil prices have gas prices has forced the European and cycle compared to other major central decreased since the beginning of June UK central banks to tighten policy in the banks. CHF could be supported by and although we do not expect them midst of an unprecedented cost of living relatively robust local economic drivers to decrease further, we do not expect a crisis. Central banks are therefore left but the yield differential with the US will strong rebound either. Global supply has in a dilemma as the room for tightening continue to limit CHF’s upward potential. picked up given the increase in Russia’s further narrows: the BoE recently In EM Asia, low Chinese inflation production, but demand is softer than became more dovish due to weak translates into an attractive real yield, before. The market seems adequately growth prospects, while the ECB remains which supported RMB. We see upside supplied for now, so we believe somewhat more hawkish and still does risks if China’s economy rebounds in prices will trade sideways in the not forecast a recession. The uncertainty 2023, but hold a neutral view on RMB coming months. USD momentum is stalling 120 115 110 105 100 95 90 USD index85 80 75 70 Jan-90 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10 Jan-14 Jan-18 Jan-22 Source: Bloomberg, HSBC Global Private Banking as at 22 November 2022. Past performance is not a reliable indicator of future performance. 33