Global currency markets currently favor pro-cyclical carry strategies, which remain the top-performing approach year-to-date despite recent risk sentiment fluctuations. A high-conviction theme involves utilizing the Euro as a funding currency, as its current valuation fails to fully reflect widening OAT spreads. While a long US dollar bias persists, conviction is tempered by conflicting economic data and uncertainty surrounding Federal Reserve policy. In emerging markets, the growth outlook has shifted, necessitating a more selective portfolio that prioritizes high-carry energy exporters like Brazil and Colombia. Meanwhile, the Swiss franc continues to strengthen against the Euro, and Sterling demonstrates resilience supported by improving macro data. The Norwegian Krone remains an outperformer, bolstered by sticky energy prices and attractive relative valuations, reinforcing the broader strategy of rotating funding sources while maintaining exposure to resilient, high-carry assets.
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