FX markets’ outlook remains uncertain towards the end of the year – Month in Review: October 2022
Macroeconomic Environment Review
Currency markets remained broadly directionless during the past month driven by changing market perceptions of relative monetary policy adjustments. The US Dollar was mostly unchanged (the Dollar Index was just 0.6% weaker by the end of the month) but volatility was high and there have been significant moves by individual currencies in opposite directions. Most notable was the recovery of the British Pound (+2.8% over the month and +4.2% when GBP/USD broke temporarily through 1.16) and the further downfall of the Japanese Yen (-2.6% over the month and -3.6% when USD/JPY temporarily broke through 150).
The outlook for currency markets remains uncertain for the rest of the year. The main themes are: 1) evidence of actual recession, 2) inflation dynamics and 3) relative monetary policy adjustments. In our view, signs of recession will emerge first in Europe, while inflation dynamics in the US will point to earlier deceleration. What that means for relative monetary policy is not straightforward. The Fed may want to see more labor market slack even though actual inflation is moderating, while the ECB may want to see more actual inflation decline even though the economy is already in recession. In our view, the pace of monetary tightening will slow over the next six months and probably come to a standstill in the second quarter of next year, but that still leaves much uncertainty for markets and room for FX volatility.
Monthly Performance Review
During the month of October 2022, AENAON Syncro Strategies generated the following total returns net of fees:
Across the spectrum of our benchmark indices, our strategies’ performance during October was mostly mixed. As a comparison, the US S&P 500 equities index added 7.99%, the Barclay Hedge Fund Index posted a 1.98% advance, the Barclay CTA Index added 0.20% while the other benchmark indices can be seen on the chart below.
Chart 1: Monthly Performance vs. Benchmark Indices – October 2022
Charts 2, 3 and 4: Inception-to-Date Performance vs. Benchmark Indices
You can always review our updated factsheets at the following Fundpeak links, with monthly performance updates and statistics since inception: