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Lira stability may give way to further pronounced weakness

We think that the surprising stability of the Turkish lira so far this year will not last much longer and we forecast it to weaken against the dollar over the coming months, from ~14.8/$ now to 18/$ by end-2022. This would be a fall of around 20% and, even then, we think the risks are skewed firmly to the downside. In view of the wider interest, we are also sending this FX Markets Update to clients of our Emerging Europe Service.
James Reilly Assistant Economist
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FX Markets Weekly Wrap

We think the dollar rally has paused, not ended

Amid mounting concerns about the global growth outlook as more central banks raised policy rates, the US dollar looks set to end the week broadly unchanged against most major currencies. Although we suspect the greenback may struggle to make new highs in the near-term, we think the backdrop will remain favourable for the dollar over the coming quarters. If, as we anticipate, the US (and global) economy slows, but avoids recession, we think the US will remain relatively well-placed to weather tighter financial conditions. And if downside risks to economic activity materialise, then the dollar would probably benefit from “safe-haven” demand, as has been the case for much of this year. Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

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FX Markets Update

Revising down our forecasts for riskier currencies

With the outlook for the global economy worsening further and the Fed still on the war path, we have revised down our forecasts for many G10 “high-beta” currencies and several EM currencies. Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

24 June 2022

FX Markets Update

We still think the backdrop is favourable for the US dollar

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Euro-zone bond markets and the French election

Even if incumbent President Macron wins France’s upcoming presidential election, we expect that the yields of French government bonds will rise further, and that the yield spreads of euro-zone “periphery” bonds to German bunds will widen as the ECB tightens its policy stance.

21 April 2022

FX Markets Update

Aussie and Kiwi to fall back as tightening cycles underwhelm

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We think Treasury yields will rise again even as inflation eases

While we think US inflation peaked in March, we still expect long-term Treasury yields to grind higher over the rest of 2022.

12 April 2022
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