Credit Agricole Research discusses the main drivers of the G10 FX markets in 2017 and how they contributed to a challenging environment for traders when it comes to following a dominant FX strategy through the year.
"We conclude that the market environment has proved rather challenging and that no single FX trading strategy has dominated.
"Indeed, the USD divergence trade was the flavour of the day early on in 2017 but crumbled soon after under the weight of lofty market expectations.
The strategy was quickly replaced by the FX carry trade, which remained supported by investors' demand for yield in H117. That said, the carry strategy has ultimately backfired, with the AUD and NZD losing ground more recently.
Another strategy that attracted a lot of investor flows was the so-called FX convergence trade, which propelled the likes of the EUR and CAD higher," CACIB argues.
Source: Credit Agricole CIB Research