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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
The sharp rally in the Brazilian real against the US dollar since the start of the year has shown tentative signs of ending, and we think that it will weaken a bit through the end of 2022. The Brazilian real has appreciated by nearly 19% against the US …
The US dollar has risen across the board this week as the Fed’s hawkish message on “quantitative tightening”, renewed sanction risks in Europe, and the polling shift in favour of far-right candidate Marine Le Pen ahead of France’s presidential election …
8th April 2022
While the prospect of a euro-zone break-up looks more remote than during the 2017 French presidential campaign, the possibility of Marine Le Pen taking power is still a major risk to euro-zone financial markets. As we discussed here and here , the recent …
7th April 2022
Another solid gain in US payrolls did little to boost the dollar today, which seems set to end the week little changed against most major currencies. During the course of this week, central banks in Chile, Czechia, and Colombia continued to tighten …
1st April 2022
The rally in the dollar seems to have paused this month, and indeed the greenback has fallen against some major currencies – especially those in Europe – this month. We think this largely reflects the rebound in risk sentiment, the stabilisation of …
31st March 2022
Amid the broad-based “risk-on” tone in markets this week, the US dollar has edged down against most major currencies. As was the case last week, an increasingly hawkish tone by the Fed and a rise in 10-year US Treasury yields had little impact on the …
25th March 2022
We estimate that, on balance, the US dollar’s “fair value” has risen alongside an appreciation of the greenback against most major currencies. This increase in fair value largely reflects the relative strength of the economic recovery in the US as well as …
Claims that the war in Ukraine will prove to be a watershed moment that ends the dollar’s position at the heart of the global financial system are wide of the mark. It could accelerate the development of smaller trading blocs that use alternative …
23rd March 2022
Our expectation that US Treasury yields will rise further leads us to conclude that the yen will weaken more against the dollar and we have revised up our end-year USD/JPY forecasts for both 2022 and 2023 . The yen has weakened sharply against the dollar …
22nd March 2022
Even after its broad-based appreciation today, the US dollar seems set to end the week a bit lower against most major currencies. This is somewhat surprising given the FOMC’s hawkish tone on Wednesday and Fed Governor Waller’s comment today that a 50bp …
18th March 2022
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 …
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
The war in Ukraine continues to dominate both the news headlines and financial markets. While market conditions have remained very volatile, this week has seen a degree of stabilisation of risk sentiment in the absence of major new escalations. As a …
11th 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
The war in Ukraine has generated two clear effects in FX markets: the European currencies most immediately exposed to the war and its economic fallout have fallen against the US dollar, while most commodity currencies have strengthened as commodity prices …
4th March 2022
The dollar has generally strengthened since Russia’s invasion of Ukraine, while European currencies have generally been the hardest hit by the war. But unlike in most risk-off episodes, the currencies of commodity exporters have benefitted from a spike in …
While Russia’s financial markets have unravelled since the country’s invasion of Ukraine, global markets have so far held up relatively well. But the mood seems to have turned a bit in recent days, and there are now some early signs of financial stress …
3rd 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
The Russian invasion of Ukraine early on Thursday morning has, aside from the ruble, so far made only limited impact on currency markets. The US dollar and other safe havens rose sharply on news of the invasion, accelerating the shifts over the previous …
25th February 2022
Although it has rebounded today, the US dollar lost a little ground against most major currencies over the week as a whole, as the FOMC minutes prompted a scaling back of market expectations for Fed tightening and risk sentiment see-sawed on continued …
18th 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 …
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
The US dollar seems set to end the week broadly unchanged against most major currencies despite a favourable shift in government bond yield differentials. While we suspect there is limited scope for a further rise in short-term US Treasury yields, our …
11th 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 …
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
A week after the FOMC’s hawkish message sent the US dollar soaring, the ECB delivered an even bigger surprise at yesterday’s policy meeting by opening the door to policy rate hikes later this year. That resulted in the euro’s largest single-day gain …
4th 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 …
The trade-weighted US dollar reached its highest level since July 2020 this week after short-term rate differentials moved strongly in its favour following Wednesday’s hawkish FOMC meeting . Admittedly, with so many Fed rate hikes discounted this year, we …
28th January 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 trade-weighted US dollar seems set to end the week a bit higher, reversing some of its recent decline. But the dollar strength has mostly been against G10 currencies; despite the fall in US equities this week, the “riskier” emerging market (EM) …
21st January 2022
Although the dollar’s rally has stalled over the past six weeks or so, and may tread water for a while longer, we think that it will ultimately appreciate a bit further this year and next. The key driver of the greenback’s rise since the middle of last …
20th January 2022
Despite several events in the US this week which would usually point to a stronger dollar – the highest US inflation print since the early 1980s , hawkish comments from both Chair Powell and Vice Chair Brainard, and a sharp rise in short-dated government …
14th 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 …
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 …
Today’s US non-farm payrolls report had little impact on currency markets, with the dollar set to end the week broadly unchanged against most other currencies. This extends a pattern of low volatility in FX markets over the past few weeks, leaving the DXY …
7th January 2022
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
This week’s much-anticipated round of central bank policy announcements made only limited impact on currency markets, which for the most part are broadly unchanged on the week. Indeed, despite the significant hawkish shift in the FOMC’s message on …
17th December 2021
While the dollar has not made much further headway this month, despite the Fed’s hawkish message at its latest policy meeting, we think the key underlying drivers of the greenback’s rally – the relative strength of the US recovery and the Fed’s shift …
The recent rally in the US dollar has been driven by strong economic fundamentals in the US relative to other major economies and a favourable shift in yield differentials, leaving the greenback only a bit above our estimates of “fair” value. We expect …
Today’s US CPI data produced a relatively limited reaction in the US dollar, which is set to end the week a bit weaker against most major currencies. Attention now turns to the 17(!) central bank meetings next week, including the Fed, ECB, BoE, and BoJ. …
10th 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
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 …
3rd 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, …