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Analysts at TD Securities explained that how much trade risk is priced into the global macro is one of the major talking points.  

Key Quotes:

“We won’t wade into the debate on broader asset classes in this regard but wanted to take a stab at the G10.

“To gauge the trade risks we built a global trade index and compared to the performance of the G9 (versus the USD) – The inputs include the US ISM, the German IFO, a broad commodity index, oil prices, and the Baltic Dry Index.”  

“The goal is to take a stab at how much growth risk could be priced into the majors. “The growth proxy index versus the annual change against the majors  provides empirical support for the reflation theme of 2015 to 2017. Indeed, the index had a nearly two-year run before pausing, bringing the majors along for the ride. The start of the uptrend also dovetails with the peak in the USD, which peaked at a 17% (annual) rally in 2015.”

“The next observation is that things have moved sideways since mid-2017 while currency markets have jockeyed around the growth index since then. It is possible that the underperformance in the majors is mostly a correction of the overshot from late-2017. That time, however, came with little shift in the growth proxy and of course other things were at work given how the FX market processes information from around the world. A three-year regression of the proxy on the currency index shows the majors sit about 3% undervalued against the current level of the index, suggesting a bit of a discount to the global trade wars theme at least against a reasonable measure of real-time growth. We think this premium is likely to ebb, offering support to most of the majors.”