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News late yesterday of a new and potentially more dangerous variant of COVID-19 emerging in South Africa has made a dramatic impact on financial markets today. In general, market shifts have been similar to those in previous periods of renewed uncertainty …
26th November 2021
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 US dollar is set to end another week higher against nearly all major currencies. To a large extent, this latest rally appears to be driven by the rise in short-term government bond yields in the US relative to other major economies, notably the …
19th November 2021
The dollar has risen to its strongest level in more than a year and, though it is not our central forecast, we think the risk of a more sustained dollar bull market is increasing. The incoming economic data – in particular, continued well-above-target …
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
The US dollar has continued to grind higher against major currencies following the release of US inflation data on Wednesday, with the DXY index reaching its strongest level in over a year. Recent data, in particular the strong inflation figure this week …
12th 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 …
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
After another week of wild swings in short-term interest rate markets, the US dollar is ending the week stronger against most major currencies. On a trade-weighted basis it is now near its strongest level since last November. Neither the Fed meeting nor …
5th 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
Currency markets remained remarkably stable for most of this week, although the US dollar is rallying sharply today on the back of data showing very strong wage growth in the US, even as a major reassessment of the pace of monetary policy normalisation in …
29th October 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
With a couple of exceptions, currency markets have had a quiet week; the US dollar is ending the week a touch weaker against most other currencies, but in aggregate it remains close to its strongest level for the year. With US bond yields continuing to …
22nd 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 …
The US dollar seems set to end the week lower against most currencies, as “risky” assets have rallied and US Treasury yields have edged down a bit. This fall back in the dollar and US yields is somewhat surprising in light of the stronger-than-expected …
15th 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 …
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
The US dollar has rallied to its strongest level since November 2020, and we think it will remain strong on the back of the Fed’s hawkish shift and ongoing uncertainty around the global recovery. While it has fallen back a little this week, on a …
11th October 2021
Despite the rise in US Treasury yields this week, the US dollar reversed some of its recent gains after today’s labour market data were somewhat weaker than expected . But given strong wage growth, we doubt this will alter the Fed’s policy path. Indeed, …
8th 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
In another volatile week, the US dollar continued to appreciate against most other currencies, reaching its strongest level, in aggregate, since last November. In part, the greenback’s rally may have been driven by month- and quarter-end flows, and it has …
1st 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 …
In a choppy week dominated by some surprising central bank announcements and the ongoing uncertainty around China’s property sector, the US dollar continued to make some headway, especially against emerging market currencies. The FOMC delivered another …
24th September 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 …
The dollar has risen against most currencies as markets have remained quiet ahead of next week’s monetary policy announcements. In addition to the FOMC, more than a dozen central banks in developed and emerging market economies will meet during a week …
17th 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 …
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
After weakening over the preceding two weeks, the US dollar has rebounded against most other currencies this week. Nonetheless, last week’s disappointing payrolls report and the slightly less upbeat tone in recent comments from FOMC members appear to have …
10th September 2021
Although it has fallen back a bit over the past three weeks, the dollar has been on the front foot for much of the summer and we think it will make some further headway over the next few months. In part, the dollar’s strength in the past three months …
The US dollar was little changed following the surprisingly weak August payrolls data, despite a small rise in US government bond yields. It looks set to end another week lower against most currencies, leaving the trade-weighted dollar near its lowest …
3rd 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
The US dollar gave back much of its gains from last week, as appetite for risk recovered and Chair Powell’s much-anticipated speech today provided some relatively dovish guidance on the path for Fed interest rate hikes. Nonetheless, we think that this …
27th August 2021
We think that the US dollar will continue to trend higher through the end of this year as commodity prices fall further and long-term government bond yields increase by more in the US than elsewhere. Over the past month, the dollar has had the largest …
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
The US dollar has risen sharply this week, reaching its highest level of the year as continued fears about the spread of the “delta” variant and further evidence of growing risks in China (around its economic slowdown, the widening regulatory crackdown on …
20th August 2021
The US dollar remains somewhat above its “fair” value on most of the metrics we track. But its overvaluation is not extreme by historical standards, nor is that of many other currencies (see Chart 1), and we do not think that it will prevent the greenback …
This Focus provides an overview of the concepts and models underpinning our new FX Markets Valuations Monitor . It is split into three sections. The first explains our framework for thinking about currency valuations. The second provides details on the …
The US dollar looks set to end the week little changed against most currencies, as US inflation data – this week’s main data release – failed to push up the currency further. Next week, the minutes of the Fed’s July meeting may shed more light on …
13th 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 …
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
The US dollar is ending the week higher against most currencies, extending its gains alongside rising US Treasury yields following the stronger-than-expected July payrolls data . With Fed officials earlier this week suggesting that several more months of …
6th 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
Following a strong run over the past month, the US dollar has weakened across the board this week after some softer-than-expected US data and a non-committal FOMC. Next week’s key data releases include the ISM manufacturing survey and the all-important …
30th July 2021
We continue to think that the US dollar will rise further in the second half of the year as the divergence between the US and other major economies in terms of growth and, especially, inflation persists. The US dollar’s initial sharp rise after the June …
27th July 2021
While the US dollar has fallen back a little against most currencies in the second half of the week as the sharp sell-off in risky assets and currencies on Monday was reversed, it looks set to end the week slightly stronger, continuing its strong run …
23rd July 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 …
While the US dollar rose sharply after Tuesday’s exceptionally strong inflation print, that was partly offset by Fed Chair Powell’s relatively dovish comments in his testimony to Congress. But overall, the greenback continues to trade on the front foot as …
16th 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
Although it has fallen back a bit today after China delivered a surprise cut to banks’ reserve requirements, the US dollar has otherwise continued to appreciate against most currencies. The dollar’s strength appears increasingly driven by concerns about …
9th July 2021
