We’ve spoken at length at FX Strategy about identifying the safe haven currencies of the future as we question whether the currencies of the past will ultimately retain their status. As we have reported on many occasions as well, we are not alone here but in the company of some very smart FX operators such as Jim Rogers and George Soros.
As a case in point - consider the GBP. Britain has obviously been a super power for centuries and its currency has enjoyed the demand that this position provides. Check out some charts and you’ll see that generally when the EUR weakens the GBP strengthens – as you would expect from a safe haven currency. Also a factor here is the macro view that the UK economy is in better shape than the Euro zone. While I’m not about to hand the trophy to the euro zone on this score – recent results released by Tesco perhaps provide a window into an impending recession in the UK. Tesco’s results release showed a decline in same store sales in the last quarter across the UK and given Tesco sell the inhabitants of the UK roughly a third of their groceries – it’s a pretty darn good indicator that things may be going in reverse there.
With this in mind I once again alert readers to the need to develop an FX strategy that accounts and considers how a currency will move in the event that the market does an “about face”. In this example – if the market decides GBP is no longer a safe haven currency then beware! One report recently quoted a commentator labelling “the pound a bogus haven”.
It’s these kinds of unknowns which get us at FX Strategy excited about looking outside the square, past the usual suspects at some longer-term plays. One of these ideas is the BRL. We have mention the BRL:USD pairing before (http://www.fxstrategy.com/articles/fundamental-articles/brazil-get-real-73.html). We are going to discus the recent surge in the BRL and why it might be only the beginning this Friday so until then we leave you with this chart to ponder.
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