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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 US dollar is ending the week stronger against most currencies, although it has fallen back a little this afternoon despite the stronger-than-expected non-farm payrolls report . While that reaction is perhaps a bit puzzling, the bigger picture is that …
2nd 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 …
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
The US dollar seems set to end the week slightly weaker, but has held much of its gains following last Wednesday’s FOMC announcement. With increasing focus on the prospects for monetary tightening globally, next week’s employment and survey data in the US …
25th June 2021
The sharp rise in the US dollar following last week’s FOMC meeting reinforces our view that the greenback will appreciate further against most currencies this year. After a period of remarkable stability, the US dollar rose sharply after the June FOMC …
24th June 2021
The FOMC’s optimistic assessment of the outlook and the significant shift up in its “dot plot” projections has sent the US dollar soaring over the past couple of days. We have brought forward our own forecast for the first Fed hike (see here), and our …
18th June 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 …
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
Although Treasury yields somewhat surprisingly fell after the larger-than-expected rise in inflation last month in the US, the dollar is ending the week slightly stronger against most currencies. Attention next week will focus on the FOMC meeting, and …
11th June 2021
Having fallen back to near its post-pandemic lows, we don’t think that the decline in the US dollar will continue. In this Focus, we explain why instead we expect the dollar to strengthen against most currencies over the next 12-18 months. In the early …
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
In another see-saw week for FX markets, the US dollar again looks to be ending it broadly flat after the key non-farm payroll figure proved somewhat weaker than consensus expectations. Next week’s US inflation print looks set to continue the data …
4th 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 …
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
While strong data in the US have provided some support for the dollar, it remains broadly flat on the week. With economic recoveries well underway in most developed markets, focus remains on what the latest data can tell us about the relative prospects …
28th May 2021
The purpose of this Focus is to introduce our new FX Markets service, which we launched in May 2021. It is split into three sections. The first provides an overview of the new service. The second explains our approach to forecasting currencies. The third …
27th May 2021
In a fairly quiet week for currency markets, the minutes from the FOMC’s April meeting proved the highlight. The US dollar rose sharply on the news that at least some Fed officials are keen to start ‘talking about talking about tapering.’ While that rally …
21st May 2021
Despite its recent resurgence, we continue to think that the euro will weaken against the dollar this year. Since the end of March, the euro has appreciated by about 4% against the dollar, and at ~1.22 the EUR/USD exchange rate is now back roughly where …
19th May 2021
The unexpected jump in US inflation data pushed the greenback higher against most currencies this week and may a harbinger of things to come – we continue to expect the dollar to appreciate this year. That said, recent US activity data, notably last …
14th May 2021
We think the greenback will strengthen a bit over the next couple of years as the economy in the US outperforms during the recovery from COVID-19 and government bond yields there generally rise faster than those elsewhere. In this environment, we expect …
12th May 2021
This Update sets out the main calls of our new FX service. As part of our expanded coverage of currency markets, we will maintain and continuously update this set of core predictions. Our first FX Outlook includes more detailed analysis, as well as …
We expect higher government bond yields in the US than in other developed markets (DMs) to push the US dollar up, as has generally been the case since the Global Financial Crisis. Admittedly, the relationship between the government bond yield gap and the …
8th April 2021
We now expect that the US dollar will strengthen somewhat over the next couple of years as the US economy outperforms and its policy mix diverges from that in most other major economies. Last year, the US dollar went through two distinct phases. The …
11th March 2021
The rise of government bond yields in the US and other developed markets (DMs) this year has made a significant impact on currency markets and, if it continues, would challenge our forecast for a weaker dollar. For most of last year, the primary driver of …
5th March 2021
Given our latest forecast for oil prices, we now expect the Canadian dollar to rise further in 2021 than we previously thought, but to drop back a bit in 2022. Despite already rising more than 15% against the US dollar from the last year’s low, we think …
25th February 2021
While we expect that EM currencies in general will rise further this year due to strong appetite for risk and a recovering global economy, we think several headwinds will limit their appreciation. For a start, EM currencies as a group have already …
19th February 2021
The pound has performed better than all other G10 currencies so far in 2021 (see Chart 1), rising from $1.36 at the start of January to almost a three-year high of $1.41 now. We expect the strength of sterling against the US dollar to continue and have …
11th February 2021
While we have revised up our end-2021 forecasts for the Australian dollar and the New Zealand dollar against the US dollar to reflect the strength of their recent rallies, we still think that the Kiwi will outperform the Aussie over the next couple of …
11th January 2021
Although several factors could conceivably support the dollar in the near term, we still think it will weaken overall this year as Fed policy remains accommodative and appetite for risk continues to grow. The first factor that could potentially drive the …
We expect both the Swedish krona and the Norwegian krone to appreciate against the euro and the dollar in 2021. However, in contrast to 2020, we expect the NOK to outperform the SEK slightly this year. The fortunes of the Swedish krona and Norwegian krone …
7th January 2021
While the real yield differential between the US and the euro-zone has moved against the euro recently we doubt that this trend will continue. And, in any case, we think that factors other than changes in real yield differentials will continue to push the …
16th December 2020
We think that the inverse relationship between the dollar and risk appetite will remain strong over the next couple of years, against a backdrop of low and stable interest rates. We expect that the dollar will weaken further and risky assets continue to …
10th December 2020
We have revised up our forecast for the euro against the US dollar, as we expect that conditions driving the euro’s appreciation will persist over the next few years despite near-term headwinds. The euro has appreciated more than 10% against the greenback …
20th November 2020
While the final results are yet to be determined, whoever wins the US presidency probably faces continued gridlock in Congress. That may explain why the moves in markets overall so far have been limited. Admittedly, Treasury yields have fallen as the …
4th November 2020
We think that the Swedish krona will appreciate a little further against the euro and the dollar in 2021, but doubt that it will remain one of the best-performing G10 currencies, as it has been this year. The Swedish krona has been the …
2nd November 2020
We are upgrading our already above-consensus forecast for the Canadian dollar, as we expect higher oil prices, stronger-than-expected GDP growth, and favourable interest rate differentials to drive a continued appreciation over the next two years. Those …
19th October 2020
We have revised up our already-bullish forecasts for the Australian dollar and the New Zealand dollar against the US dollar over the next few years, to reflect changes to our outlook for the Chinese renminbi. Crucially, though, this view hinges on …
8th October 2020
Despite falling back a little this week, we still expect most currencies in the Asia-Pacific region to make headway against the dollar over the next couple of years, led by a stronger renminbi. As we set out here , we have changed our view on the Chinese …
25th September 2020
Despite its recent rally, the euro is not particularly strong in our view, and we think that it could well rise further over the next couple of years. Since its lows in mid-March, the euro has gained about 10% against the US dollar, rising from $/€1.06 to …
11th September 2020
While we think the US dollar will weaken a bit further this year, suggestions that its role as the world’s primary reserve currency is in jeopardy are wide of the mark in our view. Although it has stabilised a bit over the past couple of weeks, the dollar …
19th August 2020
While we think that nominal interest rates and bond yields in developed markets will remain around their current ultra-low levels for some time, we think that their real counterparts will fall further in the US relative to the euro-zone and Japan. In our …
18th August 2020
Over the past few months, the euro and the BTP-Bund spread have moved closely together, with the euro strengthening as the BTP-Bund spread narrowed and vice versa. (See Chart 1.) We think that this pattern will persist over the remainder of this year . …
24th July 2020
Although the US dollar has stabilised over the past month or so as fears about a second wave have held back the rebound in risky assets, we continue to think that it will lose further ground over the rest of 2020, unless the resurgence of new cases …
20th July 2020
While the euro and many euro-zone assets have rallied significantly over the past two months, we think that there is scope for them to make more headway this year . To recap, during this period the euro has gained ground against the US dollar and is now …
26th June 2020
If we are right that commodity prices will make up more ground as economies continue to reopen, the rally in commodity currencies may have further to go. Australia, Canada, New Zealand and Norway are heavily reliant on exports of commodities (see Chart …
19th June 2020
While we think that much of the rebound in emerging market (EM) currencies is now behind us, we still expect that most of them will make a bit more headway against the dollar in the second half of the year. Last week we revised down our forecast for the …
16th June 2020
We now expect that the US dollar will depreciate further as risky assets resume their rebound and the global economy recovers from the coronavirus pandemic. At the start of the year, we forecast that the dollar would strengthen further in 2020 as …
12th June 2020
We continue to think that most EM currencies will end the year higher than their current levels, even if they face further turbulence. But we don’t expect them to recover as strongly as they did after the GFC. As we have discussed previously , emerging …
17th April 2020
While the worst may be yet to come for emerging market currencies, we expect that most will end this year stronger than they are now. Emerging market currencies have had a difficult year so far : our equal-weighted index of twenty large EM currencies has …
1st April 2020