Global Macro Outlook and Strategy: Global Rates, Commodities, Currencies and Emerging Markets

Research evidence excerpt

Global Macro Outlook and Strategy: Global Rates, Commodities, Currencies and Emerging Markets

lidate: middle-of-smile dynamics are re-emerging in growth and equities, our

models have neutralized USD exposure, and some seasonal softening in payrolls starts in the August release, although the latter could be less

pronounced this year. FX carry is the more durable and consistent theme in FX with vol approaching post-COVID lows and growth signals turning

more procyclical.

Commodities

The latest escalation stems from Iran’s attempt to redefine the terms under which commercial vessels transit the Strait. Rather than pursuing full

closure, Tehran appears intent on establishing authority over navigation itself through mandatory transit protocols and transit fees. Across natural

gas, market pricing since the conflict began appears to assume Qatari volumes return reliably by Northern Hemisphere winter. If conditions on the

ground or restart momentum challenge that assumption, it could justify a meaningful risk premium in winter pricing and along the forward curve—

especially given currently low European storage levels.

While market awaits tariff updates, China keeps buying copper. Amongst major agricultural commodities, sugar is particularly exposed to El Niño

because its key supply regions—India, Thailand, and Centre-South Brazil (which together account for roughly 65% of global exports)—face weather

risks simultaneously but through different channels.

Emerging Markets

The two key risks, energy prices and the Fed, are keeping uncertainty high and positioning low.

We keep OW EM FX supported by the cyclical outlook; MW EM rates, recognizing1 increasing two-sided risks for inflation and central banks; and MW