Currency Quarterly Q1 2026 | Insight Investment

We have seen a significant increase in geopolitical risks over the past quarter. Our forecasts for global growth are tilted to the downside given energy prices are unlikely to return to their pre-conflict levels for the foreseeable future. In addition, the wave of monetary easing that has supported developed market growth appears to be at an end. A key factor will be how long the war in Iran lasts.

The outlook for currency markets is uncertain. Waning structural support for the US dollar (USD) should erode its strength and favour a short position. However, the Iran war and its hit to global growth may mean the USD outperforms – although the outperformance since the war started has been muted.

The Alt Risk Premia model holds a long USD exposure driven by the Quality and Value Factors – Momentum and Volatility are only partially offsetting the positive USD exposure. Elsewhere, we favour longs in AUD and EUR versus shorts in CAD, JPY and SEK. Macro Discretionary is looking to add to USD shorts when the end of the Iran conflict comes into sight.

The alpha view

Given the uncertainty around the policy outlook our Macro Discretionary exposure is limited. We have a modest USD short, with a bias to add to this on rallies or once a resolution of the conflict is in sight.

The Alt Risk Premia model also holds a long USD exposure driven by the Quality and Value Factors – Momentum and Volatility are only partially offsetting the positive USD exposure. Elsewhere, we favour longs in AUD and EUR versus shorts in CAD, JPY and SEK.

The overall portfolio can be seen in Figure 1 below.

Figure 1: Insight currency absolute return exposure

Source: Insight. Data as at 31 March 2026. Note: dark green dot shows aggregate position.

Longer-term valuation overview

For less agile longer-term investors whose investment decisions lean more heavily on valuation metrics, a few points can be made.
• The USD is moderately expensive.
• GBP, SEK, NZD and CAD are expensive.
• CHF, EUR is moderately cheap, while JPY is very cheap.
• The USD, AUD, and NOK look close to fair value.

Figure 2: Local currency overvaluation (+) and undervaluation (-) versus USD

Source: Insight. Data as at 31 March 2026.