After nearly a decade of unprecedented monetary easing, Japan is navigating a crucial turning point with the Bank of Japan (BOJ) ending the era of negative interest rates.
In the recent meeting, the Federal Reserve decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent amid ongoing economic expansion and robust job gains. Although inflation has eased, it remains above the desired 2 percent objective. Even as the FOMC explicitly acknowledged that inflation path towards 2% target has stalled, Powell mentioned that there is no need for hawkishness and the next move on rates will likely to be a cut. Powell mentioned that there is no need for hawkishness and the next move on rates will likely to be a cut. Further, the FOMC has reduced the pace of balance sheet rundown from the current 90 billion a month to 60 billion a month, all by reducing the treasury runoff rate. The move shows the underlying pressure due to the sustained US Federal borrowing and fiscal deficits, and will lead to improvements in liquidity conditions to some extent.
The FOMC meeting did not give a clear indication of the timing of rate cuts. With US showing a resilient economy, market expectations of a rate cut in July have reduced.
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The “USDINR Outlook and Strategy” report provides a comprehensive analysis of factors influencing the USD/INR currency pair and outlines strategic hedging options for 2024-2025. It covers U.S. inflation trends, interest rates, and economic growth, juxtaposed with India’s strong economic expansion, inflation moderation, and robust foreign exchange reserves. The report also discusses potential rate cuts in the U.S., India’s trade and current account balances, and strategic hedging for exporters and importers based on expected currency movements, emphasizing a stable outlook till the Indian elections with INRÂ depreciation outlook for the next 6-12 months
The Euro outlook for 2024 reflects a cautious stance, with major Euro area economies like Germany and France experiencing contraction and stagnation, respectively, due to high borrowing costs and weak demand. Inflation is cooling across key economies, prompting expectations of an ECB rate cut in June to stimulate growth. Trade and current account surpluses indicate some resilience, but real estate remains under pressure from high interest rates and lower demand. Amidst this, the EU aims to curb debt through fiscal reforms, while the ECB plans to remove excess liquidity. The strategy for EUR stakeholders emphasizes hedging against potential EUR depreciation, suggesting a long-term direction towards weakening against the USD.
The 2024 lead outlook suggests a steady global demand growth of 2.2%, reaching 13.08 million tons, driven by increasing battery production, particularly in Europe and Asia. European demand is projected to rise by 3.7%, fueled by the automotive sector, while U.S. demand is set to recover by 3.1% after a decline. Meanwhile, China’s economic uncertainties persist, but lead demand there is still expected to increase by 2.4%.
The AUD Report highlights a mixed economic landscape for Australia. Inflation has reduced to 4.1% from 5.4%, driven by lower goods and services inflation, though remaining above the target range. The economy grew by 1.5% in Q4 2023, with manufacturing and service sectors showing varied performances. A significant current account surplus was recorded, driven by a rise in trade surplus. However, retail sales have slowed, and the retail sector faces challenges, despite a drop in unemployment to 3.7% and a surge in wage growth to 4.2%. The report suggests cautious optimism, with expectations of steady borrowing costs amidst challenges like a slowing housing market and retail sector.
The “KRW May Outlook” report details South Korea’s economic indicators and policy responses. In April 2024, inflation cooled to 2.9%, prompting the Bank of Korea to maintain its key rate at 3.5% as it seeks to stabilize inflation around a 2% target by year-end. GDP growth was steady at 2.2% for Q4 2023, though manufacturing showed slight contraction. Record exports to the U.S. drove a trade surge, particularly in semiconductors. Concerns remain about property market declines and rising household debt impacting policy decisions.
The “JPY May Outlook” report discusses Japan’s economic resilience amidst challenges. In Q4 2023, Japan’s economy grew by 1%, with its aging population posing ongoing labor shortages but maintaining stable per capita GDP. Inflation eased to 2.6% in March, still above the central bank’s target. Trade returned to surplus in March, driven by strong exports, particularly to the U.S. and China. The report mentions that intervention impacted USDJPY, but potential geopolitical tensions or global crises could lead to JPY volatility and appreciation, despite carry trade attractiveness.
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Samir Lodha founded QuantArt in 2012 January which has been running for the last 10 years. He is an MBA from the Indian Institute of Management Calcutta (IIMC) and has around 20 years of experience in Forex and Interest rate risk management. Prior to that, he had worked in senior positions with foreign exchange treasuries of JP Morgan (Executive Director), HSBC (Associate Director), and ICICI Bank wherein he advised large companies across India on risk management and hedging of foreign exchange and interest rates exposures. He has significant experience in Fx and rate markets along with a sound experience and understanding of global markets, market economics, hedging strategies, hedge algorithms, price calculation, and risk-return optimization.
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Srinivas Puni is an MBA from the Indian Institute of Management Bangalore (IIMB) with over 15 years of experience in structuring forex and interest rates derivatives. He has worked with banks like JP Morgan, Standard Chartered, Yes Bank, and Axis Bank in the past. He conducts training on foreign exchange and risk management as well as advises specifically large clients. Srinivas has an in-depth understanding of the quantitative models behind derivative valuation and related CVA, DVA, FVA modeling. He specifically handles pricing, valuations, structuring, risk modeling etc
Managing Partner
Vinod is an MBA from IIM Lucknow with 20+ years of experience in treasuries in India and Hong Kong wherein he advised large companies and banks on risk management, markets, and hedging. Prior to joining QuantArt, he held the positions of Executive Director in Goldman Sachs and BNP Paribas. Vinod has extensive skills in simplifying complex situations and convert the same into a hedge opportunity.
Managing Partner
Sandip is a post graduate from BITS Pilani with 25+ years of experience in global markets. He began his banking career with SBI and thereafter held leadership position at treasury at American Express Bank, Deutsche Bank and ICICI Bank in India. He was an investment banker for 7 years covering areas including PE intermediation, debt syndication and FX advisory. Sandip was Chief Treasury for Tata Steel Group between 2014-2020, where he led a large team with distinction in hedging currency, interest rates and commodity, investment of surplus funds, retirals investment, working capital management, RBI regulations etc. Â
Managing Director
Managing Partner
Managing Partner
Managing Partner
Samir Lodha founded QuantArt in 2012 January which has been running for the last 10 years. He is an MBA from the Indian Institute of Management Calcutta (IIMC) and has around 20 years of experience in Forex and Interest rate risk management. Prior to that, he had worked in senior positions with foreign exchange treasuries of JP Morgan (Executive Director), HSBC (Associate Director), and ICICI Bank wherein he advised large companies across India on risk management and hedging of foreign exchange and interest rates exposures. He has significant experience in Fx and rate markets along with a sound experience and understanding of global markets, market economics, hedging strategies, hedge algorithms, price calculation, and risk-return optimization.
Srinivas Puni is an MBA from the Indian Institute of Management Bangalore (IIMB) with over 15 years of experience in structuring forex and interest rates derivatives. He has worked with banks like JP Morgan, Standard Chartered, Yes Bank, and Axis Bank in the past. He conducts training on foreign exchange and risk management as well as advises specifically large clients. Srinivas has an in-depth understanding of the quantitative models behind derivative valuation and related CVA, DVA, FVA modeling. He specifically handles pricing, valuations, structuring, risk modeling etc
Vinod is an MBA from IIM Lucknow with 20+ years of experience in treasuries in India and Hong Kong wherein he advised large companies and banks on risk management, markets, and hedging. Prior to joining QuantArt, he held the positions of Executive Director in Goldman Sachs and BNP Paribas. Vinod has extensive skills in simplifying complex situations and convert the same into a hedge opportunity.
Sandip is a post graduate from BITS Pilani with 25+ years of experience in global markets. He began his banking career with SBI and thereafter held leadership position at treasury at American Express Bank, Deutsche Bank and ICICI Bank in India. He was an investment banker for 7 years covering areas including PE intermediation, debt syndication and FX advisory. Sandip was Chief Treasury for Tata Steel Group between 2014-2020, where he led a large team with distinction in hedging currency, interest rates and commodity, investment of surplus funds, retirals investment, working capital management,RBI regulations etc. Â
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