What China’s economic slowdown may mean for FX markets

The growing risks associated with the property sector in China underscore our view that the renminbi will weaken against the US dollar before long, even if financial stability risks do not escalate much further. We think the currencies of some economies with strong ties to China will come under pressure, too.
Jonathan Petersen Markets Economist
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FX Markets Weekly Wrap

FX markets likely to remain volatile into year-end

After rallying to its highest level of the year last week, the US dollar seems set to end this week broadly unchanged. In our view, this reflects the offsetting effects of rising short-term yields in the US (particularly after Chair Powell’s comments to Congress on Wednesday) and falling long-term yields amid growing concerns about the Omicron variant. Despite today’s mixed payrolls report, we think the bigger picture remains that sustained inflationary pressures in the US are likely to support faster policy normalisation by the Fed and keep the dollar strong. In addition to uncertainty about the Omicron variant, we expect next week’s CPI data from the US and the wide range of central bank meetings to keep volatility in FX markets elevated throughout December.

3 December 2021

FX Markets Update

We anticipate that the rand will remain weak

The South African rand has rallied over the past few days after reaching its lowest level against the US dollar in more than a year following last week’s news about the Omicron variant. Even if the new variant doesn’t lead to a major round of renewed virus containment measures, we think that the currency will remain under pressure from both domestic and external headwinds for much of 2022. In view of the wider interest, we are also sending this FX Markets Update to clients of our Africa Economics Service

1 December 2021

FX Markets Weekly Wrap

COVID throws another curveball

News late yesterday of a new and potentially more dangerous variant of COVID-19 emerging in South Africa has made a dramatic impact on financial markets today. In general, market shifts have been similar to those in previous periods of renewed uncertainty around the path of the pandemic. Risky assets and currencies have fallen across the board today, while bond yields have dropped sharply and safe havens – notably the yen – have rallied. Short-term rate expectations, which had risen significantly in the US and other DMs over recent months, have been pared back rapidly.

26 November 2021

More from Jonathan Petersen

Capital Daily

We doubt the rally in the US dollar is over

Although the US dollar, in aggregate, has fallen back sharply from its high of the year over recent weeks, we expect it will soon reverse course and strengthen against most currencies. CE Spotlight 2021: The Rebirth Of Inflation? We’re holding a week of online events from 27th September to accompany our special research series. Event details and registration here.  

10 September 2021

FX Markets Weekly Wrap

Dollar remains on the back foot after August payrolls

The US dollar was little changed following the surprisingly weak August payrolls data, despite a small rise in US government bond yields. It looks set to end another week lower against most currencies, leaving the trade-weighted dollar near its lowest level since its jump after the June FOMC meeting

3 September 2021

FX Markets Update

We expect the Swedish krona to outperform the UK pound

We think that the prospects for monetary tightening point to an appreciation of the Swedish krona relative to the UK pound over the next 6-18 months.

2 September 2021
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