Insights

March was characterized by strong US dollar performance, as the greenback recorded its biggest monthly gain since July, driven by inflation fears stemming from the Middle East conflict and the closure of the Strait of Hormuz that pushed oil prices higher. Central banks broadly adopted a more hawkish tone, with the RBA delivering a back-to-back rate hike, while others signaling readiness to tighten policy if inflation accelerates.

The Japanese yen emerged as the second-best performer, supported by intervention warnings and rising expectations of a BoJ rate hike, which discouraged further depreciation beyond key levels. The British pound ranked third, benefiting from persistent inflation in the UK and shifting expectations for Bank of England tightening, with markets pricing in around 50bps worth of additional hikes this year. In contrast, the euro underperformed despite expectations of an even more hawkish ECB, as investors remained concerned about the Eurozone’s vulnerability to energy shocks and the negative economic impact of the ongoing conflict, given its heavy reliance on energy imports.

Gold initially weakened, pressured by rising US yields and a stronger dollar amid expectations that the Fed may need to switch to hikes. However, it recovered part of its losses toward month-end as growth concerns linked to the conflict began to outweigh inflation fears.

The IXI strategy delivered positive gains in March, capitalizing on strong directional market moves. The ongoing conflict in the Middle East created a challenging environment to navigate; however, the strategy remained effectively positioned in the period. Despite periods of headline-driven volatility that weighed on performance and led to some alpha erosion, the month concluded on a strong note.