Insights

The US dollar recorded losses in August, giving back a good chunk of its July gains. The early August nonfarm payrolls revisions and the subsequent dovish rhetoric from Fed Chair Powell at the Jackson Hole Symposium contributed to the dollar’s underperformance. Meanwhile, despite inflation remaining elevated, US data continues to portray a challenging US economy, cementing Fed rate cut expectations at the September meeting.

Both the yen and the euro were the primary beneficiaries of the dollar’s weakness. The Japanese yen enjoyed a strong bid, mostly due to decent economic data releases and safe-haven flows, although investors remain doubtful about the BoJ’s ability to announce another rate hike during 2025. Meanwhile, the euro managed to outperform the dollar, despite the mixed data prints and the unfolding political situation in France. The pound also appreciated against the dollar in August, as the eventful MPC meeting in early August and the potent inflationary pressures have dented the chances of an easing spree by the Bank of England. Finally, gold finished the month in positive territory, breaking out of its prevailing range. Expectations for a more accommodative Fed stance and ongoing trade tensions supported demand for the precious metal.

August proved to be a materially challenging month for the IXI Fund strategy’s performance. The losses can be attributed to the factors outlined below, with prevailing market conditions being the primary driver. The market remained range-bound, with no clear trends developing to support the strategy’s performance. Sharp, short-lived exaggerated price swings were common across the traded instruments, likely exacerbated by the thinner liquidity typically seen in August. Moreover, significant intraday movements following data releases and announcements further impacted the strategy, which at the time was positioned on the wrong side of the moves. While the strategy promptly readjusted positions to mitigate the impact, a sizeable negative effect still materialized. Additionally, although the performance of our traded instruments is not typically correlated, the majority of them experienced losses in August, resulting in a compounded negative effect on overall performance. It is important to highlight that such periods of low directional volatility with exaggerated price swings tend to be associated with increased losses for our strategy.

Despite the drawdown, the current behaviour remains consistent with the strategy’s historical performance profile. In fact, larger drawdowns have occurred in the past under similar market conditions and timeframes. We fully understand the reasons behind the recent performance, its significance, and are closely monitoring the situation and its ongoing developments.