00:02 – Introduction to the Episode Hosts Rachel and Michael open by discussing ING’s latest FX outlook for 2026. The theme centers on a shift in global currency dynamics — moving from “playing the man” (reacting to events and sentiment) to “playing the ball” (focusing on fundamentals).00:34 – Overview of ING’s 2026 Framework ING frames 2026 as a year when volatility stabilizes after a wild 2025, marked by the DXY’s steepest first-half drop since 1972. The outlook emphasizes fundamentals: growth rates, debt sustainability, and commodity exposure, rather than short-term news flow.02:05 – Understanding the Shift to Fundamentals As markets calm, rate differentials and real growth differentials return as the dominant drivers. The Fed is expected to reach a terminal rate around 3.25% by March 2026, completing its easing cycle — setting the stage for relative-value trades across the G10.02:49 – G10 Currency Analysis With global rates converging, ING anticipates a period of stabilization for the euro, sterling, and select commodity-linked currencies. The focus turns toward relative growth momentum rather than headline event risk.03:30 – Political Risks in Europe The euro’s positive growth outlook (1.0–1.8% annualized) faces a key downside risk: French political uncertainty. Traders are urged to balance macro strength against potential political volatility when positioning in EUR/USD.04:16 – Sterling’s Vulnerability Despite its attractive yield, sterling remains weighed down by weak growth prospects and fiscal fragility. ING warns that the UK’s carry advantage might not offset these broader risks, keeping GBP exposure vulnerable.04:53 – G10 Currency Forecasts Sweden’s krona and the Australian dollar are projected to outperform, backed by strong growth and commodity demand, respectively. In contrast, the Canadian dollar faces structural weakness linked to trade and energy headwinds.05:16 – Structural Weakness in the USD The “strong dollar” era appears over. ING argues that structural hedging flows — as global investors increase USD hedge ratios (rising from 62% to 72%) — are capping dollar demand. Lower hedging costs create a persistent drag on the greenback.07:27 – The Impact of Lower Volatility With rates nearing neutral (Fed ~3.0–3.25%, ECB ~2.0%), markets enter a low-volatility regime. Low FX and interest-rate vol encourage carry trades, creating an environment that favors higher-yielding currencies.09:26 – Emerging Market Carry Trades Carry opportunities are broadening. ING highlights strong EM performance in 2025 (Egypt, Nigeria) and sees continued potential in Turkey, Africa, and the CIS region as stability improves and funding costs fall.09:50 – Stability of the Yuan and Asian FX ING expects USD/CNY to remain in a 6.90–7.30 range, supported by active PBoC management. A mildly appreciating yuan and softer dollar backdrop may lift other Asian currencies.10:43 – The Indian Rupee’s Resilience The rupee stands out as a high-yield favorite for 2026. Solid fundamentals, fiscal discipline, and foreign inflows linked to supply-chain diversification support a stable, appreciating outlook for INR.11:00 – Commodity Divergence A clear divide emerges: metals bullish, energy bearish. Gold demand stays strong amid low real yields and central bank buying. Copper benefits from electrification and infrastructure trends, favoring exporters like Chile, Peru, and South Africa. Meanwhile, crude and gas oversupply keeps pressure on energy currencies — particularly Canada’s loonie.12:07 – Key Takeaways and Macro Implications The main takeaway: 2026 will be defined by stability and fundamentals. A capped dollar and neutral rate environment encourage cross-market relative value trades and sustained demand for high-yield EM and Asian currencies.12:36 – Navigating Macro Certainty vs Political Risk Traders face a nuanced trade-off — eurozone macro stability versus French political uncertainty. Balancing macro certainty against event risk becomes central to EUR positioning.13:02 – Conclusion and Outlook Rachel and Michael close by emphasizing that 2026 marks a disciplined return to fundamental analysis in FX. The dollar ceiling, political risks, and carry opportunities together frame a year of calm but complex positioning choices.

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