Insights

The US dollar traded lower against most of its major counterparts in November, with the last week of the month being its worst since late July. Although Fed Chair Powell pushed back against a December rate cut at the last FOMC gathering, the softness revealed by the shutdown-delayed US data and dovish remarks by key Fed officials, including the influential New York Fed President John Williams, have prompted investors to assign a strong 95% chance of a 25bps rate cut at the December meeting.

The greenback gained ground only against the yen, which tumbled even after the intervention warnings by Japan’s finance minister Katayama. The dovish profile of new Japanese Prime Minister Takaichi raised speculation that the BoJ may have to skip a December rate hike. The pound was the main gainer, despite investors turning more dovish on the BoE’s implied rate path. Sterling opted for a relief bounce during the last week of the month after UK finance minister Rachel Reeves raised the nation’s tax burden to a post-World War II high. The euro was the second gainer in line as several ECB officials continued to signal that monetary policy is “in a good place”, with no more rate cuts baked into the cake by the market. Gold rebounded from near the psychological zone of $4,000 mainly driven by the dovish shift in Fed rate cut bets.

November unfolded as a relatively quieter month for the currency markets, with volatility at low levels for the IXI Fund traded instruments. Gold was the only asset with more meaningful movements into the month, though its impact was still considerably milder than the sharp dynamics we experienced in October. Against this muted environment, our models generated only a faint signal for the IXI strategy, consistent with the lack of directional conviction. As a result, performance was close to zero throughout the month and ultimately concluded with a small negative return.