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At face value, the US dollar remains in something of a lull: the DXY Index is on track to end the week roughly where it ended the previous two. But that apparent stability belies the significant moves in both currency and broader asset markets this week. …
26th July 2024
While the pound has outperformed all major G10 currencies so far this year, we still expect it to depreciate against the greenback later in the year as the Bank of England (BoE) eases monetary policy more than money markets currently discount. While it …
24th July 2024
The US dollar has bounced back over the past couple of days as interest rate expectations in the US have rebounded a little and the risk-off shift in equities bled into currency markets. While the Japanese yen has given back some of its …
19th July 2024
Japan’s intervention in support of the yen is not enough in itself to generate a sustained rebound in the yen. But with the FOMC (finally) nearing its first rate cut while the BoJ continues to tighten its policy stance gradually, we think the tide is now …
17th July 2024
The US dollar is again ending the week on the backfoot in the wake of yesterday’s softer-than-expected US CPI report and what looks (potentially) like another round of FX intervention from Japan’s Ministry of Finance. Short-term momentum has now shifted …
12th July 2024
The continued weakness of the renminbi and the yen against the US dollar despite the narrowing of interest rate differentials via-a-vis the US is something of a conundrum, but our sense remains that both currencies will rebound against the dollar later …
11th July 2024
The results of France’s parliamentary elections mean it should avoid the large, unfunded fiscal expansion that two of the three major political groups were advocating. But it also means France is very unlikely to be able to reduce the deficit as required …
8th July 2024
More evidence of softening in the US economy from data releases – notably, the ISM survey data and June’s employment report – weighed on US Treasury yields and left the greenback lower against most major currencies on the week. Otherwise, election-related …
5th July 2024
The US dollar has edged higher over the past quarter or so, driven by the twin tailwinds of rising Treasury yields and US equity outperformance. We think these factors may continue to support the greenback over the near term, and the looming prospect of a …
3rd July 2024
The US dollar index looks set to end the week broadly unchanged after core PCE came in line with expectations today. Yesterday’s presidential debate in the US also does not seem to have had much impact on the dollar despite the sizable change in election …
28th June 2024
The upcoming French election continues to loom over euro-zone financial markets and the euro. We think it would take a worst case scenario in which France’s fiscal outlook worsens materially to generate a sustained fall in the euro. That is a plausible …
27th June 2024
This Update summarises the answers to some of the questions which clients raised in our recent online briefing about the forthcoming French legislative elections. The questions are divided into three sections: politics, economics, and markets. (The online …
24th June 2024
Despite more central bank policy announcements this week, most currencies fluctuated within a tight range and the dollar seems set to end the week broadly flat – boosted a bit by the release of PMI data earlier today. Our sense is that this may remain the …
21st June 2024
Latin American assets have generally underperformed those elsewhere of late, in part driven by rising risk premia on the region’s assets. We think these risk premia may rise further over the coming year or so, given our downbeat view on economic growth in …
The US dollar has been taken on a rollercoaster ride this week. The US CPI and PPI reports for May have suggested that price pressures are gradually easing. These somewhat promising data reports have boosted investors’ expectations for rate cuts, despite …
14th June 2024
Although the EUR/USD exchange rate is not far above multi-decade lows, we think structural factors mean that the euro is close to “fair value” relative to the US dollar and most other major currencies. So we doubt the euro will rebound against the dollar …
12th June 2024
The strong nonfarm payrolls report released earlier today broke the recent streak of downward data surprises out of the US and has renewed strength in the dollar. Even so, the greenback looks set to end the week only somewhat stronger against most …
7th June 2024
Elections in South Africa, India, and Mexico have generated sizeable reactions in their financial markets over the past week or so, highlighting the potential for electoral surprises to generate short-term volatility. This Update takes stock of the …
Having lagged behind other emerging market (EM) currencies for most of the post-pandemic period, the Polish zloty has lead the pack over the past six months. While we think that most of this rally has now run its course, we expect the zloty to stay …
3rd June 2024
The US dollar has eased back a bit further against other G10 currencies this week as another round of slightly softer US inflation data dampened the recent rebound in US interest rate expectations. By contrast, today’s upside surprise in euro-zone …
31st May 2024
The US dollar has fallen back across the board in May as expected interest rate differentials have shifted against the US vis-à-vis many other economies, and risk sentiment has recovered. Overall, the greenback remains caught in something of a crosswind. …
The dollar looks set to end the week broadly unchanged against most currencies, halting its slide over the past couple of weeks. Bond yields in the US rebounded this week, partly due to the Fed minutes published on Wednesday but have also risen in other …
24th May 2024
We think the kiwi and the aussie strength will continue over the next couple of years as we expect they will be among the last developed economies to start an easing cycle. The aussie and the kiwi have been among the best performing G10 currencies since …
The US dollar has eased back in the wake of somewhat better news on US inflation this week, which has seen US interest rate expectations fall back a bit further. Between this week’s inflation news, the recent softening of activity figures (including this …
17th May 2024
For much of the past year, the dollar has strengthened against emerging market (EM) currencies even as EM sovereign dollar bond spreads have narrowed. One way or another, that is unlikely to last. One relatively unusual feature of the strengthening of the …
16th May 2024
Despite the rand’s recent outperformance, we think risks around the upcoming election in South Africa, among other factors, will cause renewed weakness in the currency before long. Since US Treasury yields peaked in late April – falling further after the …
15th May 2024
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
The US dollar looks set to end the week broadly unchanged against most currencies, with its renewed strength against the yen being the key exception. Next week’s CPI data release out of the US could break the calm that has prevailed in FX markets over the …
10th May 2024
Although the monetary easing cycle in Brazil is entering a much slower phase, we think the Brazilian real will remain under pressure against the dollar over the coming quarters. Emerging market (EM) currencies have generally struggled against the …
9th May 2024
An eventful week in financial markets is ending with the dollar down, but mounting a comeback in the wake of today’s worryingly weak US non-manufacturing ISM survey . Between the earlier softer-than-expected US non-farm payrolls , the cautious message …
3rd May 2024
Despite the correction in equity markets over the past month, risk premia generally remain low across financial markets. While we expect this to continue as an AI-driven bubble inflates in equity markets, this Update explores four areas that could …
Chinese policymakers won’t risk reliving the turmoil of 2015 by engineering a sudden devaluation of the renminbi . They may allow the currency to weaken gradually over the coming years to help industry deal with oversupply or to offset the impact of new …
1st May 2024
The US dollar has made further gains against most major currencies over the past month or so. Interest rate expectations have continued to pick up in the US and in most places outside Asia, weighing particularly on that region's currencies (prompting …
30th April 2024
We think that the recent weakness in the Mexican peso was partly a symptom of stretched positioning. Given that risk premia still appear unusually low and the outlook for the “carry trade” is gradually worsening, we think that the peso will depreciate …
Japan’s apparent intervention in support of the beleaguered yen may buy some time for the currency to stabilise, but is unlikely to lead to sustained turnaround until US interest rate expectations start to fall back. While Ministry of Finance (MoF) …
29th April 2024
The US dollar is ending the week a touch softer against most currencies despite another set of hotter-than-expected US inflation figures. But the main story in currency markets this week is the ongoing drop in the Japanese yen, which hit a new low for the …
26th April 2024
This interactive dashboard allows you to explore our exchange rate forecasts through to end-2026. If you have subscriber access to the data underlying this dashboard, you can download it via the menu options in the top right of each chart or table. If you …
The US dollar would have to appreciate a lot further before having significant effects on the global economy and financial system. A key risk to watch for is the widening policy divergence between the US and Asia leading to a major depreciation in the …
25th April 2024
Financial markets have largely taken the latest escalation in the Middle East over the past week in stride. Having spiked from $87pb to $90pb on the news of today’s attack, Brent crude oil has now fallen back to below $88pb. Similarly, the big moves in …
19th April 2024
We think the headwinds driving the depreciation of the Chilean peso against the US dollar have largely run their course. We expect the Chilean peso to recover some ground by the end of the year. The Chilean peso has underperformed almost all other major …
18th April 2024
Continued resilience in the US economy looks set to delay the Fed easing cycle until (at least) the second half of this year, so we now think the greenback will stay strong against most currencies over the next couple of quarters. We now forecast the DXY …
16th April 2024
The US dollar has surged in the wake of another too-hot US CPI print , a dovish ECB and disappointing credit data out of China . The DXY index is now approaching its peak of last autumn (~106 currently, vs ~107 on 1 st November), and our sense is that the …
12th April 2024
The euro has fallen sharply against the greenback this week, and we wouldn’t be surprised if it weakens a bit further in the short term. That said, we think a fall below parity in the EUR/USD rate is unlikely in the absence of a substantial divergence in …
11th April 2024
Another robust US non-farm payrolls report has seen the dollar rebound a bit, unwinding some of its losses earlier in the week and putting the DXY index on track to end the week near its highest level on the year. With FOMC members continuing to signal …
5th April 2024
The US dollar has started the year on the front foot as US growth and inflation again surprised to the upside, prompting the Fed to (again) take a more hawkish stance than other major central banks. In our view, a continued rise in US Treasury yields – …
4th April 2024
The US dollar has eked out small gains against some major currencies so far this week, leaving the DXY index just below 105 at the time of writing. During an otherwise quiet week, the February PCE data release out of the US tomorrow may add to the …
28th March 2024
We continue to think that policymakers in China and Japan will do enough to keep their currencies from weakening much further, but the risk of a break lower in one, or both, is increasing. Push-back from the authorities in China and Japan has stabilised …
27th March 2024
We still expect the Canadian dollar to depreciate against the US dollar as interest rate differentials relative to the US widen and Canada’s terms of trade worsen. The Canadian dollar has held up well against the greenback relative to other G10 currencies …
The US dollar has bounced back from its brief drop after the FOMC’s policy announcement and Chair Powell’s press conference, and is ending the week stronger across the board. To some extent that is surprising: the FOMC’s overall message arguably had a …
22nd March 2024
In the wake of this week’s FOMC and BoJ policy announcements we are revising our forecast for the Japanese yen. While we still expect the Japanese yen to rebound over the course of 2024, we now project it to reach 140 by the end of the year and 135 by …
21st March 2024
