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We think the war in Ukraine and a more hawkish Fed will cause the yield of 10-year US Treasuries and the US dollar generally to end 2022 and 2023 a bit higher than we had previously anticipated. We now also expect DM equities to be a bit lower by the end …
18th March 2022
Some of the effects of the war on markets have begun to unwind in recent days, but we think a few of the changes it has brought about will last even if the mood in markets continues to improve. While the situation remains volatile, at the time of writing …
16th March 2022
Although they have fallen back over the past week, we expect the prices of most commodities to remain elevated relative to their recent past. We will be revising our currency forecasts to reflect these views. Our commodities service s are the best places …
15th March 2022
There has been some discussion of possible FX intervention by the ECB to support the euro, but there is next to no chance of that being announced at today’s press conference, and unless the single currency falls much further we think likely the Bank will …
10th March 2022
New sanctions on Russia have led to a sharp plunge in the ruble, and an effective freeze of most of the country’s financial markets. We think that the outlook now depends mainly on the extent to which this marks the start of an enduring break in Russia’s …
28th February 2022
With tensions between Russia and Ukraine continuing, the risk of a conflict with far-reaching economic consequences remains uncomfortably high. This Update considers what the impact on global financial markets has been so far, and the potential …
18th February 2022
Despite their strong start to 2022, we think that emerging market (EM) commodity currencies will struggle over the next couple of years as commodity prices fall back from their current high levels. That said, we doubt that they will suffer as much as …
16th February 2022
Although last week’s hawkish surprises from the ECB and the Bank of England weaken the case for further US dollar appreciation against the euro, sterling, and other European currencies, we are sticking to our view that the greenback will strengthen a bit …
11th February 2022
Although a major drop in US equities poses a key downside risk to our view that the US dollar will rise, we doubt the slight underperformance of US equities relative to global equities that we forecast would prevent the greenback from appreciating against …
10th February 2022
We expect most emerging market (EM) currencies to struggle, despite their strong start to 2022, as commodity prices fall and the Fed seeks to tighten financial conditions. That said, we think that most EM currencies will hold up a bit better than last …
4th February 2022
We expect the major central and eastern European (CEE) currencies to depreciate against the euro this year. We think that the Czech koruna will continue to fare better than the other CEE currencies, although not by as much as last year. To recap, the …
27th January 2022
The deadlocked end to talks between Russia, the US and NATO and subsequent hawkish noises from Russian officials have caused a risk premium to emerge on Russian asset prices and will keep the prospect of tighter Western sanctions on the table. The …
14th January 2022
China’s currency was remarkably stable against the US dollar in 2021 and appreciated against other major currencies. But we doubt that trend will continue this year: a slowing economy, monetary policy easing, and a gradual normalisation of China’s current …
13th January 2022
We do not think the returns from many financial assets will be as good in 2022 as they were in 2021. For a start, we envisage a sell-off in government bonds in most places, reflecting the outlook for monetary policy. And, in general, we foresee an …
We think that rate differentials and commodity prices will be the key factors driving the relative performance of six “high-beta” DM currencies in 2022, continuing last year’s trend. We expect all these currencies to lose ground against the US dollar this …
Although we wouldn’t be surprised if the rally in the US dollar paused in the short term, we still expect the relative strength of the economic recovery in the US and monetary tightening there to push the greenback higher against most currencies in 2022. …
6th January 2022
Four central themes in currency markets this year have been the US dollar’s steady grind higher since June, the underperformance of other safe-haven currencies, the remarkable stability of the USD/CNY exchange rate, and the large falls in several emerging …
20th December 2021
Three recent developments – the emergence of the Omicron variant, the Fed’s signal that it may further accelerate the pace of policy normalisation, and China’s move towards policy easing – have combined to create crosswinds for currency markets. While we …
9th December 2021
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 …
1st December 2021
Given the uncertainty around Omicron, and the revealed preference of the SNB in recent weeks to largely stay out of the FX market, we would not be surprised to see the Swiss franc rise further against the euro in the near term. But any upside is limited, …
The Israeli shekel has appreciated sharply in the past few weeks, making it one of the best performing currencies during the pandemic. While we don’t expect this recent strength to continue in the very near term, we think that Israel’s macro fundamentals …
24th November 2021
The fresh falls in the Turkish lira following the CBRT’s interest rate cut today have left Turkey firmly in crisis territory and echoes of previous “sudden stops” during major EM currency crises in the past are growing louder. Without an aggressive policy …
18th November 2021
We think that the recent pick-up in bond market volatility will persist and that volatility in currency markets will also rise further as uncertainty around the economic outlook and monetary policy remains high. Bond market volatility across most …
12th November 2021
We expect the yen to weaken a bit more against the US dollar as we think that government bond yields in the US will resume their rise before long. Since the start of October, the yen has been the worst performer among G10 currencies . (See Chart 1.) The …
9th November 2021
We think that the Brazilian real will weaken a bit further against the US dollar over the next year, as fiscal risks and deteriorating terms of trade continue to weigh on the currency. With the exception of the Turkish lira, the real has been the …
4th November 2021
Despite their recent positive correlation, we think that oil and the dollar will go in opposite directions before long: we continue to think that oil prices will fall back as the supply situation improves, while we expect the greenback to stay strong …
1st November 2021
We think that the recent re-pricing of near-term interest rate expectations across most developed markets is overdone and that several of the “high-beta” G10 currencies will come under renewed pressure. Over the past few weeks, expectations for interest …
26th October 2021
We expect the Turkish lira to remain among the worst-performing currencies over the next two years, as political pressures, high inflation, and a vulnerable external position continue to weigh on the currency. The lira has been the worst-performing …
22nd October 2021
We doubt that the direct effects of the tapering of the Fed’s asset purchases will have much of an impact on the US dollar, and think that other factors will be more important in pushing the greenback higher. Since the September FOMC meeting , the latest …
15th October 2021
Although we wouldn’t be surprised if energy prices remained elevated for a while, we still think they will fall back over the next year, weighing on the currencies of net energy exporters. The rally in energy prices, particularly since the end of August, …
14th October 2021
Although the krone has rallied this year on the back of high energy prices and the expectation of tighter monetary policy, we do not expect this to continue. We think slowing global growth and normalising energy prices will work against the krone over the …
7th October 2021
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. Historically, the US dollar has tended to appreciate in …
1st October 2021
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. This year, the USD/CNY exchange rate has not traded more than ~2% away from where it was at the start …
24th September 2021
We doubt that the outcome of next week’s federal election in Canada will have much bearing on the economy and the loonie. Instead, we still think that bond yield differentials and oil prices will be the main drivers of the Canadian dollar, and will push …
17th September 2021
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 …
16th September 2021
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. This year, sterling has been one of only two G10 currencies to strengthen against the US dollar, while …
2nd September 2021
Although we forecast the greenback will rise further over the next year or two, we think that it will face growing headwinds over the longer term. As we set out in our first FX Markets Valuation Monitor , we think that the dollar is somewhat overvalued …
26th August 2021
We expect further rises in US Treasury yields to support continued gains in the US dollar against most other developed market (DM) currencies, especially the yen and the Swiss franc. Since near the start of the month, the yields of 10-year US Treasuries …
13th August 2021
Although the currencies of most commodity exporters appear undervalued in the context of high commodity prices, we still think most commodity currencies will depreciate further against the US dollar. The run-up in commodity prices this year has not been …
11th August 2021
We think that the upside risks to our US dollar view have increased. On a trade-weighted basis, we forecast a ~4% rise from its current level by the end of 2022; this Update considers what factors might deliver a more significant (10%+) rally in the …
4th August 2021
We have revised down our forecasts for many of the G10 “high-beta” currencies and several currencies in EM Asia and LatAm. This update sets out the rationale behind those revisions and updates our key calls. Since the June FOMC meeting, currency markets …
23rd July 2021
The US dollar has risen significantly since the June FOMC meeting, with another surge after today’s strong inflation data , and we think the greenback will make further headway in the second half of the year. Since the start of 2021, the dollar has gone …
13th July 2021
While the shift towards rate hikes in several key emerging markets has provided a boost to their currencies, we doubt that the carry trade will fare as well in the second half of the year. In 2020 interest rates fell sharply almost everywhere as central …
6th July 2021
The Russian ruble appreciated to a one-year high against the dollar recently but we think the rally will fade as oil prices fall back and US Treasury yields rise further. That said, the central bank’s determination to rein in inflation should keep Russian …
2nd July 2021
We think that the Norwegian krone will continue to strengthen against the euro over next year or so. This is despite our forecast for a pull-back in oil prices and reflects our view of the relative prospects for monetary policy in Norway and the …
1st July 2021
We expect the yen will continue to depreciate against the US dollar this year as 10-year US Treasury yields resume their rise. Since January, much of the movement in developed market (DM) exchange rates appears to have been driven by changes in the …
18th June 2021
The reaction to this week’s FOMC meeting supports our view that the US dollar will strengthen against most currencies this year. Yesterday the FOMC revised up its forecasts for growth and inflation in the US relative to its last set of economic …
17th June 2021
We now expect interest rates to rise across Central and Eastern Europe in the coming years and for all the major currencies to strengthen against the euro, with the Czech koruna and Polish zloty faring best. Until recently, currencies in Central and …
10th June 2021
We continue to think that the renminbi will end the year weaker against the US dollar and, while not an essential factor in that forecast, the recent steps by China’s policymakers to weaken the currency reinforces our view that the renminbi is nearing a …
4th June 2021
Several emerging market commodity currencies have struggled this year, despite the rally in most commodity prices. We think that most will face further headwinds, even if the current valuation gap may provide some buffer. Last year the prices of …
1st June 2021