The softening global economy is leading central banks to cut rates, and that could change your carry trade strategy.
Unless you've been spending quality time in Outer Mongolia, you've probably noticed that the global economy is softening.
Olivier Desbarres, director and head of FX strategy at Barclays, says that's creating pressure on central banks around the world to cut interest rates.
All this has the potential to upend a longtime pattern of carry trades, whereby traders could sell a longtime low-yielding currency against one offering higher rates and be fairly confident that they would be able to pocket the difference.
A case in point: Japan'sdecision not to cut interest rates has some traders talking about a shift in which currencies still work for carry trades, with the yen, a longtime funding currency, high on their lists.