Slowing global growth may continue to help the US dollar

We think that the ongoing slowdown in global economic growth points to continued dollar strength, which suggests to us that there is significant upside risk to our already-bullish dollar forecast.
Jonas Goltermann Senior 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 Jonas Goltermann

CE Spotlight

What would an era of higher inflation mean for currencies?

We think that a return to a regime of higher and less stable inflation in many major economies would result in a rise in exchange rate volatility and, over time, the depreciation of the currencies of those countries which experience higher inflation.

30 September 2021

FX Markets Weekly Wrap

Hawkish Fed & China risks point to a stronger dollar

In a choppy week dominated by some surprising central bank announcements and the ongoing uncertainty around China’s property sector, the US dollar continued to make some headway, especially against emerging market currencies. The FOMC delivered another hawkish message, signalling that a taper announcement is imminent and shifting its “dot plot” policy rate projections higher again. Although the dollar has not soared in the way that it did following the June FOMC meeting, US bond yields have risen sharply. We continue to think that a renewed widening of bond yield gaps in favour of the US will drive the dollar higher before long.

24 September 2021

FX Markets Update

The curious case of the super-stable renminbi

We think that the renminbi’s period of remarkable calm will end before long, and that it will depreciate against the US dollar over the next few months. In view of the wider interest, we are also sending this FX Markets Update to clients of our China service.

24 September 2021
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