The MillTech Global CFO FX Report 2026 analyses the findings from surveys of over 1,500 finance leaders at corporates and fund managers across Europe, the UK and North America, revealing their FX strategies, appetite for AI and automation, geopolitical influences, operational challenges and more.
The report reveals that nearly four in five fund managers (77 per cent) have suffered losses as a result of unhedged FX risk. The impact is even more pronounced in Europe, where losses were reported by all respondents (100 per cent), and in the UK, where the figure reached 95 per cent. Against a backdrop of heightened geopolitical and economic volatility, these findings underscore the growing urgency to prioritise FX risk protection, the firm writes. Reflecting this shift, 61 per cent of fund managers globally who do not currently hedge say they are now considering doing so in response to current market conditions.
This uncertainty is reshaping fund managers’ hedging strategies, with nearly half (47 per cent) planning to increase hedge ratios and 45 per cent intending to extend hedge lengths. The data points to a clear global shift towards stronger and more sustained risk protection, as managers seek to shield a greater proportion of exposure for longer periods. Globally, average hedge ratios currently stand at 48 per cent, while the average hedge length is 5.4 months.
This increase in hedging activity comes despite a 63 per cent rise in global hedging costs, underscoring the extent to which fund managers are prioritising risk management. Cost pressures were most pronounced in the UK, where hedging costs rose by 69 per cent, compared with more moderate increases in Europe (64 per cent) and North America (57 per cent). Notably, more than one in 10 respondents (12 per cent) reported a doubling of hedging costs.
Automation is rapidly moving to the forefront as fund managers seek greater agility and operational efficiency in an increasingly uncertain environment. Nearly every firm surveyed is now considering FX automation, while an overwhelming 99 per cent are actively evaluating the use of AI within their FX operations.
Other key findings include:
Reliance on manual processes – Email remains the most common method globally, used by 45 per cent of fund managers, and phone-based instruction is still widely used (40 per cent).
Global credit crunch – Nearly three-quarters of fund managers (72 per cent) reported increases in credit rates or fees, while 55 per cent experienced tighter lending criteria, directly affecting liquidity and overall funding costs. These pressures are particularly pronounced in the UK, where high costs and securing credit lines ranked as the two most significant challenges.
Challenges and priorities – Fragmented service provision was cited as a leading FX challenge by 27 per cent of respondents, closely followed by the difficulty of demonstrating best execution at 26 per cent. Meanwhile, cost transparency has emerged as the top priority globally, cited by 39 per cent of respondents, reflecting the need for clearer oversight of FX expenses.
Key deployment areas for automation – Price discovery (39 per cent) and end-to-end FX workflows (38 per cent) are the leading automation priorities globally. However, when broken down by region, UK funds place greater emphasis on reporting (38 per cent), while North American funds place greater emphasis on settlement (49 per cent). Meanwhile, in Europe, onboarding liquidity providers is the priority (34 per cent).
Eric Huttman, CEO of MillTech, says: “2026 began with a sense of déjà vu. Once again, the re-emergence of tariff threats has unsettled global capital markets, triggering sharp currency moves and reinforcing the reality that trade disruption and FX volatility are becoming recurring features of the financial landscape.
“This prompts fund managers to reassess how much FX risk they’re willing to carry, balancing the impact of market uncertainty against rising hedging costs. Many are responding by extending hedge tenors and increasing hedge ratios to protect more of their FX risk for longer. Crucially, the fact that hedging activity is increasing even as hedging costs rise shows how important it is for fund managers to protect themselves from FX risk. Without protection, fund managers may remain exposed to the swings and dips of the currency market, and the majority are judging this to be too risky given the current turbulence.”
Nick Wood, Chief Trading Officer at MillTech, says: “Currency volatility will be the defining theme in 2026, driven by tariffs, geopolitical tensions, and shifting economic policies. The weakening USD is boosting inflation expectations in the US, while accelerating trade disputes reshape capital flows. President Trump has also introduced a more transactional approach to foreign relations, weakening Western trade alliances and invoking market instability. Meanwhile, ongoing global conflicts and political uncertainty in Europe add further complexity. As investors navigate this turbulence, the only certainty is that currency markets will remain highly reactive to these macroeconomic forces.”
