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Although the Turkish lira is at its weakest ever level against the US dollar, it would have fallen far further by now were it not for intervention by policymakers. We anticipate that the currency will depreciate sharply before long against a backdrop of …
13th April 2023
This edition of the Weekly Wrap is published today in view of the Good Friday holiday tomorrow. It has been another relatively subdued week in currency markets, but despite another batch of disappointing economic data out of the US and accompanying falls …
6th April 2023
Improved economic fundamentals outside the US have coincided with the dollar’s sharp fall since last September, narrowing the greenback’s substantial overvaluation. But we still think that it remains somewhat stronger than warranted by fundamentals. …
Despite making up some ground today, the dollar seems set to end the week somewhat lower against nearly all major currencies. Banking turmoil in the US and elsewhere appears to be receding (for now), with the latest Fed data confirming emergency …
31st March 2023
The dollar’s February rebound has been cut short by turmoil in the US regional banking sector, but we continue to think the greenback will make one final push higher as advanced economies fall into recession and risk sentiment deteriorates. Although the …
30th March 2023
With the dust settling on the recent turmoil in US and European banks, economists from across our financial markets coverage assessed the damage to the outlook for bonds, equities and FX. Chief Markets Economist John Higgins and the team held an online …
The US dollar had spent much of the week on the back foot amid a growing belief that banking sector issues might prove a largely US-specific problem. But that narrative, and price action, has (again) been turned on its head today as European banks …
24th March 2023
The ongoing struggles of the banking sector in the US and elsewhere has muddled the outlook for the dollar. But while we think the balance of probability has shifted against the greenback, we continue to expect a near-term rebound in the dollar, in …
In a week dominated by headlines about bank failures and the risk of another financial crisis, resulting in extraordinary volatility in government bond markets as interest rate expectations have plunged, the foreign exchange market has been a haven of …
17th March 2023
While the backdrop has shifted dramatically, we still think there’s a strong case for our existing forecasts of a further rally in long-dated bonds by the end of the year, and some near-term strength in the US dollar and weakness in equities. The Swiss …
The ghosts of 2008 have made a sudden reappearance. Many metrics of core market functioning have worsened worryingly fast, but the overall situation is still long way short of the type of strains seen during the worst parts of the Global Financial …
16th March 2023
A preferential rate to facilitate wine exports is the latest addition to Argentina’s myriad exchange rates, but it doesn’t address the fundamental problem that the peso is overvalued. We estimate that the currency needs to fall by around 30% to restore …
15th March 2023
The dollar’s sharp rally after Fed Chair Powell’s hawkish testimony to Congress on Tuesday sent US interest rate expectations soaring now looks like ancient history. Instead, after unexpected turmoil in the US banking sector and today’s …
10th March 2023
The South African rand has weakened sharply against the US dollar so far this year, markedly underperforming other emerging market (EM) currencies. We expect domestic and global headwinds to drive a bit more depreciation, to 19.0/$, later this year. But …
9th March 2023
Fed Chair Powell’s testimony to Congress has prompted a material revision to our forecast for the path of the fed funds rate and suggests the near-term risks to that forecast are skewed to the upside. This Update sets out some of the likely implications …
8th March 2023
Currency markets have mostly gone sideways this week, with the US dollar set to end it a touch weaker against most other major currencies. (See Chart 1.) With both activity and price data continuing to surprise to the upside in the US , Europe and China, …
3rd March 2023
As political risks appear to be largely discounted by investors, we expect the Colombian peso to outperform other major EM currencies over the next couple of years. Although the Colombian peso is broadly unchanged against the greenback so far this year, …
2nd March 2023
The Israeli shekel has been amongst the worst performing currencies over the past month amid a rise in risk premia in Israel. We think it may remain under pressure against the US dollar over the coming months; but we doubt it will keep underperforming its …
1st March 2023
The US dollar looks set to end a third week higher against most major currencies amid mounting evidence that the US economy started the year on strong footing . In particular, hawkish FOMC minutes and a strong monthly rise in US PCE supported the dollar …
24th February 2023
Stronger-than-expected data out of the US have pushed up US yields more than elsewhere and drove the greenback higher against most currencies for the first time since its cyclical peak in October of last year. While US economic resilience may keep the …
23rd February 2023
Another round of robust US economic data and renewed hawkish rhetoric from Fed officials has given the US dollar a boost this week. With economic activity holding up better than we and most others had anticipated and price pressures appearing more …
17th February 2023
The Mexican peso’s outperformance since the start of 2022 has pushed up its valuation substantially, and we think that this leaves it vulnerable to sharp falls against the US dollar if, as we expect, the US economy falls into recession later this year. …
16th February 2023
A further decline in US inflation seems largely priced in to financial markets. But we still think investors are too optimistic about how quickly the economy will grow, and as such are sticking with our view that equities will come under renewed pressure, …
14th February 2023
The US dollar is set to end the week a touch stronger against most currencies, adding to its gains last week. But, aside from the Japanese yen round-tripping on news over the next BoJ governor, it’s been a relatively quiet week for the greenback – not …
10th February 2023
Given that US economic outperformance has tended to coincide with a stronger dollar, we suspect a “soft landing” in the US economy would provide a favourable backdrop for the greenback, if it also meant that growth in the US remained more resilient than …
Some of the moves in China’s financial markets that followed its rapid reopening – including a rise in equity prices, higher bond yields and stronger renminbi – have unwound in the past couple of weeks, but we think they will resume before too long. …
We expect “high-beta” developed market (DM) currencies to weaken against the dollar over the coming months as risk sentiment worsens and, in some cases, yield gaps move against them. But we anticipate a rebound in appetite for risk later this year and …
9th February 2023
The US dollar looks likely to record its largest weekly rise against other major currencies since its cyclical peak in September of last year. While investors’ dovish interpretations of announcements by the Fed, BoE, and ECB led the dollar on a roundtrip …
3rd February 2023
Despite some better news recently, we still think that advanced economies face a tough couple of quarters, an outturn which does not seem to be fully discounted in financial markets. With this in mind, our view remains that risky assets in general will …
Tension across financial markets has come down significantly since November, contributing to the US dollar’s broad-based weakness in that period. Ahead of key central bank meetings this week, this Update assesses whether that trend will continue. 2022 saw …
1st February 2023
The US dollar looks set to end another week broadly unchanged against most major currencies. Activity data released this week seemed consistent with resilience in European economies and near-recessionary conditions in the US , and we have revised our …
27th January 2023
Optimism around China’s rapid re-opening and stronger-than-expected data out of Europe have put continued pressure on the US dollar over the past month or so. In turn, we have revised down our forecasts for the greenback against major currencies. But we …
26th January 2023
The US dollar looks set to end the week broadly flat against most other major currencies after, by recent standards, a quiet week in FX markets. But Wednesday may have offered a glimpse of what is to come over the coming months – weak US retail sales and …
20th January 2023
With inflationary pressures easing and the global growth outlook improving, we no longer expect the US dollar to breach its late September peak. But we still think that souring risk appetite associated with recessions in developed markets will boost the …
While the Bank of Japan pushed back against expectations that it would end its Yield Curve Control (YCC) policy yesterday, we think it is only a matter of time before YCC bites the dust. That suggests further upward pressure on the yield of JGBs and the …
19th January 2023
The US dollar has remained under pressure as hopes of a “soft landing” continue to build and risk sentiment improves. While yesterday’s key US CPI data came out roughly in line with consensus expectations, and the market reaction was more limited than …
13th January 2023
While the medium-term outlook for the renminbi and other Asian currencies has improved, and we have revised some of our forecasts accordingly, we continue to anticipate that a deterioration in risk sentiment as other major economies slide into recession …
Financial markets have begun 2023 on a cautious note, see-sawing on mixed data. Although it has dropped back today, the US dollar has started the new year on the front foot, rising against most other major currencies on the week as a whole. That said, …
6th January 2023
Downward pressure on the Hong Kong dollar has abated in recent weeks and we think it is very unlikely that the existing currency framework will be abandoned any time soon. For much of 2022, the USD/HKD rate traded at the upper end of the band defined by …
The BoJ’s surprise decision to widen the tolerance band around its yield curve control target earlier this week will hopefully prove the final curveball of what has been an eventful year across currency markets. The yen has surged around 3% against the …
23rd December 2022
The dollar has stabilised over the past month after its sharp fall in November, and we continue to think that a slowing global economy and worsening risk sentiment will lead to another (possibly final) leg up in the dollar over the first half of 2023. …
21st December 2022
The surge in government bond yields around the world in response to today’s decision by the Bank of Japan (BoJ) to tweak its policy of Yield Curve Control (YCC) highlights the risks to international markets posed by the country’s huge investment overseas. …
20th December 2022
The Bank of Japan’s unexpected decision to alter its yield curve control (YCC) policy has led to a surge in the yen today; we now expect the USD/JPY rate to drop further, reaching 125 by end-2023. The yen has jumped by ~3% against other major currencies, …
After a choppy few days in financial markets, the US dollar is ending the week a touch stronger against most other major currencies as risk sentiment has worsened sharply in the wake of the latest round of central bank meetings. We suspect this will …
16th December 2022
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Our latest Asset Allocation Outlook can be found here . Two of the three topics we expect to dominate the global macroeconomic …
15th December 2022
We suspect investors are underestimating how disruptive the transition from zero-COVID will prove for China, which could threaten some of the recent rises in the country’s equity prices, bond yields and currency. But once that disruption has begun to …
14th December 2022
Even after a small boost following the release of US PPI data today, the US dollar seems set to end this “data-light” week broadly unchanged against most major currencies. By contrast, we suspect next week will prove more volatile given the ten major …
9th December 2022
The Canadian dollar has underperformed most other currencies over recent weeks, and we expect it to depreciate further against the US dollar over the first half of next year. The loonie has been the worst performer among major currencies since the US CPI …
Today’s US non-farm payrolls data provided some relief to the US dollar, but it still looks set to end the week lower against most major currencies. This weakness mostly reflects the market reaction to Fed Chair Powell’s much-anticipated speech on …
2nd December 2022