MH Model Portfolio: Long EMFX and Long EUR/CHF Bolster Performance
- By Bilal Hafeez
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Portfolio Changes
We closed four trades over the past week.
First, we closed both short GBP/USD at 1.2750 and EUR/USD at 1.0874.
We had thought US outperformance vs the RoW would continue. However, both ISM manufacturing and services, as well as durable goods, came in below expectations. So, despite the US economy remaining resilient, US outperformance could have peaked for now.
Second, we closed EUR/GBP at 0.8525.
Since entering the trade on 30 January, EUR/GBP has traded in a 0.8500-0.8580 range without traction higher or lower. Given this lack of momentum, we see a limited probability of material near-term upside so close the trade.
Lastly, we exited long EUR/PLN at 4.295 as it hit our stop loss.
PLN has continued to strengthen on rate differentials, positive news over EU funds, and optimism over upcoming local elections. However, we believe stretched valuation, a likely resurfacing of political tensions, and a C/A returning to deficit leave significant headwinds for PLN.
Historic Performance
Our portfolio is down 0.5% YTD, after falling 0.5% last week. The portfolio has returned +49.9% since inception (+10.4% annualised) with a 0.9 Sharpe ratio. This continues to place it above the average discretionary macro hedge fund since inception, which has gained 39% (Bloomberg: BHDMAC Index; Chart 1).
Current Trades
DM
Rates
- Pay 2Y EUR vs receive 2Y GBP Swaps (target 90 bps, stop 155 bps) – read here.
- Long 10y Spain vs BTP and Bund (target 12 bps; stop 36 bps) – read here.
FX
- Long EUR/CHF (target 0.9700; stop 0.9394) – read here.
EM
FX
- Long EM FX Basket (target 95.0; stop 102.0) – read here.
- Long 6M EUR/TRY digital put, strike 32.0 – read here.
- Long EUR/CZK (target 25:60; stop 24:00) – read here.
Rates
- 5y10y MXN TIIE Steepener (target 40 bps; stop -30 bps) – read here.
- Receive BRL DI F27 (target 9.50%; stop 10.80%) – read here.
To see a full list of our trades since inception to the end of 2023, please see here.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.