📝We Are More Constructive On G10 Value Reversions Into 2024: J.P. Morgan FX Strategy

In H1, currency returns have been informed by one single driver - rates differentials. If we wanted to oversimplify, we could say that rates were the main driver (via carry-level or trends/ rates changes)

Contrary to H1, July-October saw the partial resurgence of other factors such as growth or valuations without completely condemning carry as most implementations were still flat to positive from July to October. Other strategies benefitting from the rates backdrop were also challenged after months of strong performance, notably G10 rates momentum or long-term trend follow- ing (but not the combination of both)

From the beginning of January to the end of June, a nominal carry basket of 27 currencies returned +20%, the best half-year performance since 2003. The strategy was driven by the yield and growth resilience of LatAm currencies and HUF.

We are more constructive on G10 value reversions. In both extreme scenarios (strong rally or sharpe downturn),the trades which screen with the largest upside are involving rich or distressed G10 currencies.

- J.P. Morgan FX Strategy