FX Markets

FX Markets Weekly Wrap

FX Markets Weekly Wrap

All eyes on Wednesday’s FOMC announcement

Although Treasury yields somewhat surprisingly fell after the larger-than-expected rise in last month’s inflation in the US, the dollar is ending the week slightly stronger against most currencies. Attention next week will be focused on the FOMC meeting, and especially on whether Fed officials start ‘talking about talking about tapering’ asset purchases. While we don’t expect the FOMC to formally announce tapering until later this year, any hints about its intentions in that regard could provide some support for Treasury yields and the dollar.

11 June 2021

FX Markets Weekly Wrap

Lacklustre payrolls report leaves the dollar hanging

In another see-saw week for FX markets, the US dollar again looks to be ending it broadly flat after the key non-farm payroll figure proved somewhat weaker than consensus expectations. Next week’s US inflation print looks set to continue the data rollercoaster – the payrolls report indicated strong wage growth (0.5% m/m), pointing to growing price pressures in the US economy.

4 June 2021

FX Markets Weekly Wrap

Payrolls take centre stage again

While strong data in the US have provided some support for the dollar, it remains broadly flat on the week. With economic recoveries well underway in most developed markets, focus remains on what the latest data can tell us about the relative prospects for monetary tightening. Although temporary factors continue to distort data globally, we expect that next week’s data releases, in particular the all-important US payrolls figure, will continue to point to a robust economic recovery.

28 May 2021
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FX Markets Weekly Wrap

Prospects for central bank tightening remain in focus

In a fairly quiet week for currency markets, the minutes from the FOMC’s April meeting proved the highlight. The US dollar rose sharply on the news that at least some Fed officials are keen to start ‘talking about talking about tapering.’ While that rally proved short-lived, it points to the key questions hanging over currency markets: when, and how quickly, will the Fed tighten policy? And how will the pace of its normalisation process compare to that of other central banks? Our view remains that most central banks, including the Fed, will not raise interest rates as soon as money markets now discount. But the difference between our expectations and those of investors is smaller in the US than in most other countries, and the strength of the US recovery and growing upward pressure on inflation there suggests to us that US Treasury yields will resume their rise. That is the key reason why we expect a stronger dollar.

21 May 2021

FX Markets Weekly Wrap

Currency markets weighing the prospects for recovery

The unexpected jump in US inflation data pushed the greenback higher against most currencies this week and may a harbinger of things to come – we continue to expect the dollar to appreciate this year. That said, recent US activity data, notably last week’s non-farm payrolls, have been mixed. As a result, the bigger picture is that the dollar has struggled to make much headway. The prospects for monetary policy normalisation remain key. Minutes from the April FOMC meeting, released on Wednesday, may provide some further clues as to policymakers’ intentions in that regard and may prove the highlight in a relatively quiet week for economic data.

14 May 2021
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