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The Canadian dollar has held up relatively well against the US dollar so far in 2022, but we think the factors underpinning the loonie’s resilience will fade and push it lower against the greenback over the next couple of years. The loonie has been the …
11th August 2022
Although we think the end of the Fed’s hiking cycle is drawing nearer and that yields of long-term US Treasuries have already peaked for this cycle, we don’t believe this necessarily spells the end of the dollar bull market. Instead, we expect safe-haven …
We held a Drop In yesterday outlining our latest forecasts for global financial markets. This Update answers some questions that we received during that Drop In but didn’t have time to address. What would have to go right for bond and equity markets to be …
10th August 2022
The huge upside surprise in US payrolls data pushed the greenback higher against most major currencies today in an otherwise quiet week for FX markets. The continued strength of the labour market in the US adds to our conviction that the Fed remains some …
5th August 2022
While China-Taiwan tensions haven’t yet caused ructions in global financial markets, any escalation that threatened to disrupt trade and/or financial flows almost certainly would. This Update explores the potential ramifications of such an event across …
We think the dollar will appreciate further through at least the end of the year as the global economy continues to falter and “safe-haven” demand remains strong. Although we see limited scope for a further widening of expected interest rate differentials …
4th August 2022
The dollar looks set to lose further ground this week after the FOMC’s 75bp hike was, somewhat strangely, interpreted as the start of a dovish pivot and US Q2 GDP disappointed . However, the greenback has rebounded a bit today after income and spending …
29th July 2022
We still expect a higher 10-year Treasury yield, lower S&P 500 and stronger US dollar over the remainder of the year, but have pared back our forecasts for the rise in yields and fall in equities. In particular, we now suspect the 10-year yield is …
We estimate that, in aggregate, the US dollar has become more overvalued over the past few months. (See Chart 1.) In our view, this is because fundamentals in the US relative to other major economies have not improved to the same extent that the greenback …
With global economic growth weakening and risk sentiment unlikely to rebound sustainably this year in our view, we think that EM currencies generally will remain under pressure over the next several months and that there are a handful of countries where …
26th July 2022
After a series of strong weeks left it at two-decade highs, the US dollar seems set to end this week lower against most major currencies. Despite weaker-than-expected activity data out of the US, UK, and euro-zone this week, cyclically sensitive (i.e., …
22nd July 2022
Despite their recent rebound, we still think that “high-beta” developed market (DM) currencies will weaken further against the US dollar for the remainder of the year. DM currencies have risen against the greenback over the past week or so, reversing some …
Although it has dropped back a little today, the US dollar is on track for another strong week, rising further against all other major currencies and hitting a new 20-year high. At the time of writing, the greenback was at or around our end-2022 forecasts …
15th July 2022
We expect the Mexican peso to fall further against the US dollar amid mounting external headwinds. As the dollar has appreciated to multi-decade highs against major developed market currencies, such as the euro and the yen, it has also extended its gains …
With the DXY index surging to a fresh 20-year high, the US dollar has reached our end-2022 forecasts against several of the other major currencies. While we are sticking to our current forecasts for now, this Update considers how the factors underpinning …
The US dollar has continued to surge this week, with the key EUR/USD rate breaching a two-decade low and approaching the symbolic parity level as fears around Europe’s energy supply worsened. Solid US data, in particular today’s stronger-than-expected …
8th July 2022
We forecast a further ~2% appreciation of the trade-weighted US dollar over the rest of this year. But we continue to think that the risks are skewed towards even greater dollar strength. This Update considers what factors might deliver a more significant …
7th July 2022
We suspect that the latest political turmoil in the UK adds to the reasons to expect a renewed rise in the 10-year Gilt yield, weakness in the pound, and continued trouble for the FTSE 100. The market reaction to the resignation of Boris Johnson as Prime …
The US dollar looks set to end the week stronger against most major currencies, nearing its strongest level since 2002 as “risky” assets remained under pressure. A key reason for the dollar’s rally is that weak activity data out of the US , including the …
1st July 2022
While the strength of the US dollar already reflects expectations that the Fed will continue its aggressive policy tightening, we think that disappointing global growth and weak risk sentiment will underpin further strength in the greenback this year. …
30th June 2022
Amid mounting concerns about the global growth outlook as more central banks raised policy rates, the US dollar looks set to end the week broadly unchanged against most major currencies. Although we suspect the greenback may struggle to make new highs in …
24th June 2022
We held a Drop-In on Wednesday to discuss what the evolving outlook for monetary policy and global growth means for our markets forecasts. This Update recaps the key questions we addressed in the Drop-In and answers several of the questions that we …
With the outlook for the global economy worsening further and the Fed still on the war path, we have revised down our forecasts for many G10 “high-beta” currencies and several EM currencies . The US dollar has appreciated almost across the board this …
A handful of EM central banks have ramped up FX sales to provide support to weakening currencies over the past couple of months. And with inflation high and the US dollar likely to strengthen further, others could follow suit. FX intervention is unlikely …
Although it has fallen back a little recently, we continue to think the greenback will appreciate further against most currencies as global economic growth disappoints. In our view, “safe-haven” demand has been a key driver of the latest strength in the …
23rd June 2022
Among the flurry of central bank announcements, the continued plunge in equity markets, and wild gyrations across core government bond markets, currencies have been pulled in several directions this week. While the US dollar is ending the week only a …
17th June 2022
The Turkish lira is once again depreciating sharply against the US dollar and we expect this to continue. We revise our forecasts for the lira and pencil in further substantial weakness by the end of 2022, to 24/$. The lira has plunged ~15% or so against …
15th June 2022
The weakening in the yen to a 24-year low and a crack in the Bank of Japan’s ceiling on 10-year yields today is putting significant pressure on policymakers to respond. FX intervention is a possibility, but we doubt it would be effective. We suspect the …
13th June 2022
The US dollar rose against all major currencies this week, reversing some of its fall over the past month or so. Much of this strength came late in the week as equity markets came under renewed pressure in the aftermath of the ECB’s hawkish message at its …
10th June 2022
While the spillovers from the renminbi’s depreciation against the US dollar over the past two months have in some ways been similar to previous periods of renminbi weakness, the impact on other emerging market (EM) currencies has differed somewhat from …
9th June 2022
While we doubt it will be the main driver of the US dollar, the ongoing reduction in the size of the Fed’s balance sheet (i.e., “quantitative tightening”, or “QT”) adds to our conviction that the greenback will continue to appreciate over the rest of the …
While it has rebounded over the past couple of weeks, we expect the renminbi to resume its fall against the US dollar as China’s economy underwhelms , interest rate differentials continue to shift against the renminbi, and the last two years’ strength of …
1st June 2022
The US dollar seems set to end the week lower against most major currencies, a third successive weekly decline, and a drop of ~3% in the DXY index from its multi-year high earlier this month. In part, this week’s fall probably reflects the rebound in …
27th May 2022
While the US dollar has fallen back over the past couple of weeks after a strong run, we think that the key underlying drivers of the greenback’s appreciation this year remain in place. Although there has been a small rebound this week, the past month or …
After another volatile few days across financial markets, the US dollar looks set to end the week lower against most major currencies. (See Chart 1.) Given the renewed falls in “risky” assets, that is arguably somewhat surprising: the dollar generally …
20th May 2022
So far, the sell-off across bond and equity markets this year has not triggered major signs of systemic risk. If that were to change, central banks would probably have to step in to prevent a destabilising cycle of panic selling and money market distress …
Despite a reversal today, the US dollar looks set to appreciate for the sixth week running as “risky” assets remain under pressure. The DXY index has had its largest six-week gain since mid-2016 (while the S&P 500 has had its worst such period since the …
13th May 2022
We think that currencies in Central and Eastern Europe (CEE) will depreciate further against the euro over the rest of this year. Within the region, we anticipate that the koruna will continue to outperform and the forint will remain a regional laggard – …
12th May 2022
The trade-weighted US dollar has edged up to multi-decade highs as the Fed has started to raise its policy rate. In this Focus, we analyse past Fed tightening cycles and explain why we think the dollar will continue to appreciate over the course of the …
The Indian rupee hit a record low against the US dollar today, but the big picture is that RBI intervention has helped it hold up better than most EM currencies recently. Given that the RBI has ample FX reserves, we expect the rupee to remain more stable …
9th May 2022
The US dollar looks set to eke out small gains against most currencies this week as US bond yields rose further and equities whipsawed. While the net effect of the FOMC’s policy announcement and today’s US payrolls report on currency markets was …
6th May 2022
We think the euro will eventually weaken further, falling to parity against the US dollar, as the euro-zone economy falters, the terms of trade shock from higher energy prices feeds through, and the global economic outlook continues to worsen. While the …
We think that the surprising stability of the Turkish lira so far this year will not last much longer and we forecast it to weaken against the dollar over the coming months, from ~14.8/$ now to 18/$ by end-2022. This would be a fall of around 20% and, …
5th May 2022
The US dollar rose for a third week in a row, reaching its strongest level since early 2017 as the growing policy divergence between the major Asian central banks and the rest of the world as well as concerns about Europe’s energy supply added fuel to …
29th April 2022
The combination of aggressive tightening from the Fed and worsening risk appetite has driven the dollar to its strongest level, in aggregate, since the early 2000s. While the greenback looks due a pause, we now expect it extend those gains over the coming …
Another week of broad-based appreciation has seen the US dollar edge higher even as US bond yields have stalled. Instead, it is the sell-off in equity markets over the past couple of days which has driven the greenback to a new high. In some sense, the …
22nd April 2022
We think the yen will drop even further as policy divergence widens. We now forecast USD/JPY to reach 140 by the end of this year, before dropping back as the Fed takes its foot off the gas in 2023. While it has stabilised over the past couple of days, …
With the yen falling to a 20-year low against the dollar, talk of foreign exchange market intervention is growing. While we think the bar for any intervention is high , this Update answers some key questions. 1. Who decides whether to intervene? Bank of …
21st April 2022
The Aussie and the Kiwi have been amongst the best performing G10 currencies against the US dollar so far this year but, while we expect both to remain resilient in 2022, we eventually expect them to weaken. Both the Aussie and the Kiwi have outperformed …
20th April 2022
The US dollar continued to edge higher against most major currencies, with the DXY index (and 10-year US Treasury yields) reaching a new high for the year. The renewed rise in Treasury yields today reversed the dollar’s weakness following a …
14th April 2022
