FX Markets

FX Markets Weekly Wrap

Dollar rally pauses as Fed & US data disappoint

Following a strong run over the past month, the US dollar has weakened across the board this week after some softer-than-expected US data and a non-committal FOMC. Next week’s key data releases include the ISM manufacturing survey and the all-important non-farm payrolls report. We expect further disappointment on the data front, which could easily lead to a deeper retrenchment for the greenback. That said, its recent strength has been driven to a significant extent by worries about the spread of the “delta” variant and risks in China’s economy and financial system. Both remain wildcards that may keep the dollar strong near term.

30 July 2021

FX Markets Chart Book

We expect more upside for the US dollar

We continue to think that the US dollar will rise further in the second half of the year as the divergence between the US and other major economies in terms of growth and, especially, inflation persists.

27 July 2021

FX Markets Weekly Wrap

The FOMC announcement may extend the dollar rally

While the US dollar has fallen back a little against most currencies in the second half of the week as the sharp sell-off in risky assets and currencies on Monday was reversed, it looks set to end the week slightly stronger, continuing its strong run since the June FOMC meeting.

23 July 2021

Key Forecasts

DM

2021

2022

2023

EM

2021

2022

2023

DXY

94.97

95.15

92.35

USD/CNY

6.70

6.90

6.70

EUR/USD

1.15

1.15

1.20

USD/INR

75.00

76.00

77.00

USD/JPY

115.0

115.0

115.0

USD/RUB

74.00

76.00

80.00

GBP/USD

1.35

1.35

1.40

USD/BRL

5.50

6.00

6.00

USD/CAD

1.25

1.28

1.32

USD/MXN

21.00

21.50

21.50

AUD/USD

0.73

0.71

0.71

USD/ZAR

15.50

16.50

16.00

Sources: Refinitiv, CE; all values are year-end forecasts


Dollar rally pauses as Fed & US data disappoint

FX Markets Weekly Wrap

3 August 2021

Latest Outlook

FX Markets Outlook

We expect higher US yields to lead to a stronger dollar

We think the greenback will strengthen a bit over the next couple of years as the economy in the US outperforms during the recovery from COVID-19 and government bond yields there generally rise faster than those elsewhere. In this environment, we expect the currencies of other economies where recoveries are likely to be swift and central banks relatively quick to begin normalising policy, broadly in line with market expectations, will hold up best – these include New Zealand, Norway, Czechia, Chile, and Korea. By contrast, we think the euro, the yen, the renminbi, and most other currencies in Europe and Asia will weaken as both near-term interest rates and long-term yields there rise more slowly, or not at all. Finally, we think that the currencies of several countries (including Turkey, Brazil, and Colombia) that combine shaky fiscal and/or external balance sheets with significant political uncertainty will remain under pressure – and that South Africa may eventually join that club as the next ANC leadership contest at the end of 2022 draws closer.

12 May 2021