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While policymakers’ efforts to prop up the renminbi and the yen alone are not enough to generate a lasting turnaround , they will probably do enough to buy time until US interest rate expectations and Treasury yields fall back and the dollar depreciates …
15th September 2023
We’ve revised up our projections for the S&P 500 and the 10-year Treasury yield, but still expect both to fall a bit by the end of this year. We have also tweaked our forecast for the US dollar. We had been projecting that the S&P 500 would struggle over …
14th September 2023
The US dollar looks set to end the week higher against nearly all other major currencies. Remarkably, the DXY Index is set for an eight consecutive weekly rise, something that has rarely occurred since 1990. (See Chart 1.) And while that index is …
8th September 2023
Although the Canadian dollar has held up relatively well among G10 currencies, we think it will weaken in the coming quarters as investors discount a more dovish policy path for the Bank of Canada (BoC). Despite the broad-based strength in the US dollar …
7th September 2023
A run of soft US labour market data has left the dollar on track to end the week slightly lower against most major currencies, threatening to break the DXY index’s six-week winning streak despite a strong rebound in the wake of the ISM manufacturing …
1st September 2023
The cyclically-sensitive antipodean currencies have had a tough year so far, and a fair bit of bad news already appears priced in to both the aussie and the kiwi. Nonetheless, we don’t think their recent rebound will prove the start of a sustained …
The dollar has rebounded in August but remains broadly unchanged on the year so far. We continue to think that it (and the yen) will rally over the second half of the year as the long-anticipated recessions finally take hold in the US and other advanced …
31st August 2023
PMI and other data released this week have added to evidence of the relative strength of the US economy amid a weakening global backdrop, shifting yield gaps in favour of the greenback and pushing it higher against most major currencies yet again. (See …
25th August 2023
Gilt yields and sterling have fallen from their cycle highs over the past month or so, and we think the worsening economic growth outlook in the UK and elsewhere mean that this trend will continue over at least the next couple of quarters. Although …
24th August 2023
The US dollar has continued to grind higher, with the DXY index on track for a fifth consecutive weekly gain on the back of more bad news out of China , continued pressure on risk sentiment, and a new cycle high in long-term US Treasury yields. In light …
18th August 2023
With the headwinds growing for China’s economy, we think its equity markets will struggle, its 10-year yield will continue to fall and its currency won’t rebound as quickly as we’d thought. At the start of the year China’s economy was powering ahead. But …
17th August 2023
Exceptionally high inflation in the major economies of Central and Eastern Europe (CEE) relative to elsewhere has left their currencies overvalued against the US dollar and on a trade-weighted basis in our view. We think there is scope for these …
16th August 2023
In spite of last week’s weak US payrolls report and this week’s soft CPI data, the dollar has, on net, risen against all other major currencies this week. This may be partly a result of hawkish comments from Fed officials in the aftermath of the CPI …
11th August 2023
Since our last Financial Market Stress Monitor on 13 th May, strains have continued to ease. This abbreviated Stress Monitor takes stock of developments since then. Overall, stress across core financial markets appears about as low as at any point …
10th August 2023
The appreciation in the Swiss franc this year has been largely at odds with moves in many of the factors which typically drive the currency. We believe this is mostly due to intervention from the Swiss National Bank (SNB) in foreign currency markets. …
7th August 2023
With the mini-meltdown in US bond markets taking centre stage over recent days, the dollar had been on the front foot for much of the week until the softish non-farm payrolls report earlier today prompted a rebound in bond markets and a drop back in the …
4th August 2023
The US government losing another one of its “AAA” ratings after Fitch Ratings’ downgrade decision Wednesday is more symbol than substance. But three key related points are worth highlighting. First, the market reaction differs significantly from that of …
As major central banks near the end of their tightening cycles, the latest evidence of US economic resilience suggests to us that the dollar is poised to appreciate over the next couple of quarters. Over the past week or so, the Fed and other major DM …
3rd August 2023
FX Markets Chart Pack (Jul. 2023) …
31st July 2023
The Fed’s emphasis on data dependency amid even more evidence of resilience in the US economy pushed US Treasury yields up and the greenback higher against most major G10 currencies this week. Taken together with mixed activity data out of Europe and …
28th July 2023
The BoJ’s decision earlier today to, in effect, end its long-standing Yield Curve Control (YCC) policy means that long-term government bond yields in Japan will become more responsive to economic conditions and developments in global markets. While that …
The Mexican peso’s relentless rise against the US dollar and most other major currencies is increasingly at odds with macroeconomic fundamentals. We think the peso is vulnerable to an abrupt fall over the coming months if, as we expect, risk sentiment …
25th July 2023
The US dollar has rebounded over the past two days and looks set to unwind much of last week’s fall. (See Chart 1.) With US data somewhat mixed, much of this rebound in the greenback seems to have been driven by a reassessment of the outlook for other …
21st July 2023
While recent data suggest the US in on a path towards disinflation and a less aggressive monetary policy stance from the Fed, we continue to think that the dollar will rebound in the second half of 2023. Short-term momentum has swung against the dollar as …
While the US dollar has fallen against most currencies since the start of the year, our estimates of the greenback’s “fair value” are broadly unchanged, leaving it only somewhat overvalued in our assessment. The valuations of most G10 currencies …
Despite today’s big reaction in markets in the UK to better-than-expected inflation news , we still think investors are overestimating the peak in interest rates there and underestimating how much monetary policy will be eased in 2024 and beyond. Indeed, …
19th July 2023
In the wake of last week’s solid US payrolls report and this week’s below-expectation CPI data, which have strengthened hopes of a “soft-landing” in the US economy, short-term momentum has swung heavily against the dollar. Although it has rebounded a bit …
14th July 2023
Emerging markets (EM) currencies with high short-term yields – i.e., high “carry” – remain the strongest currencies against the US dollar this year, even if their gains over the past week have been relatively small. We think the conditions supporting …
June’s soft US CPI print seems to have given investors renewed hope that inflation could fall back to normal levels without the economy slowing too much, if at all. We continue to think that the chance of a more-significant economic slowdown is …
13th July 2023
Not so long ago, a higher 10-year TIPS yield almost invariably meant an underperformance of US “growth” stocks vis-à-vis their “value” peers, a lower gold price, and a stronger dollar. That’s changed in 2023, though, with the relationships weakening …
While the US dollar has dropped back in the wake of today’s non-farm payrolls report, continuing its recent struggles, two other trends in currency markets are showing some signs of exhaustion. Most notably, the Chinese authorities have stepped up their …
7th July 2023
China has stepped up its support of the renminbi and Japan appears to be edging closer to direct intervention to prop up the yen. While pressure from higher US interest rates may well continue in the short term, we think that both currencies will rebound …
We expect the Brazilian real to reverse its gains against the US dollar by the end of the year as Brazil’s central bank eases policy and risk sentiment deteriorates. Although it has fallen a bit over the past few weeks, the Brazilian real has risen nearly …
6th July 2023
The US dollar has continued to tread water against most major currencies this week. With G10 central bankers generally sticking to their hawkish messages at the ECB’s Sintra conference and few major data releases, FX markets seem set to end the week (and …
30th June 2023
Reconciling the slide in Japan’s currency with big flows into its stock market from abroad and a perception that the appeal of foreign bonds to Japanese investors has waned in response to high hedging costs is easier to do once securities transactions …
Click here to read the full publication. While “riskier” currencies have generally had the best of it over the past couple of months, the dollar has remained rangebound and, in aggregate, is broadly unchanged on the year. With the euro-zone already in …
28th June 2023
The US dollar has rebounded a bit this week on renewed signs that a global slowdown is underway and a growing sense that, like the Fed, most other central banks are also at, or near, the end of their tightening cycles. Although the summer doldrums are …
23rd June 2023
The rapid depreciation of the Swedish krona has pushed the currency down to its lowest ever level against the euro. Worse still, we do not think the krona is significantly below “fair value”, nor do we expect the headwinds facing it to abide anytime soon. …
22nd June 2023
The US dollar has fallen for a third week in a row, with the DXY closing in on its weakest level so far this year. But, although it is increasingly challenged by the current “risk-on” environment, we are sticking to the view that the greenback will …
16th June 2023
Despite faltering commodity prices and growing concerns around China’s economic rebound, most commodity currencies have held up reasonably well this year. But we continue to think that will change in the second half of 2023 as advanced economies slow …
The US dollar looks poised to end another week down a touch – the DXY index’s first consecutive weekly fall since April. That probably reflects yield gaps vis-à-vis most other developed markets (DMs) shifting against the greenback as surprise central bank …
9th June 2023
Dismal economic growth has established the Korean won as one of the worst-performing emerging market (EM) currencies against the dollar this year. We expect Korea’s bleak growth prospects and unfavourable yield gaps to keep the won weak, though its …
8th June 2023
A version of this report was published as an opinion piece in the Financial Times on Wednesday 7 th June Signs that newly re-elected Turkish president Erdogan is willing to move away from unorthodox economic policies has led to an increase in investor …
7th June 2023
After a strong run since mid-May, the US dollar has stalled this week after a run of mixed data and Fed officials striking a cautious tone in recent speeches pushed US interest rate expectations a touch lower. The latest innovation in central bank …
2nd June 2023
The US dollar has rebounded in recent weeks as resilient US economic data and renewed hawkish noises from the FOMC have revived the “higher for longer” narrative, shifting relative interest rate expectations back in favour of the US. There is probably …
31st May 2023
For the third week running, the dollar looks primed to notch up decent gains against most other major currencies. We don’t think newsflow regarding the US debt ceiling (which has swung from positive to negative and back this week) has had much bearing on …
26th May 2023
Despite the recent slowdown in China’s reopening recovery, we don’t expect the renminbi to weaken much further against the US dollar. Yield differentials should begin to tilt back in favour of the renminbi as the Fed turns towards interest rate cuts later …
25th May 2023
President Erdogan looks set to secure victory in the second round of Turkey’s presidential election on 28 th May. This Update sets out how we think this would play out in Turkey’s financial markets this year: in short, we think that measures of Turkey’s …
The US dollar looks set to end the week stronger against most major currencies amid the prospect of policy rates in developed markets (DM) remaining “higher for longer”. While this week’s rise in DM bond yields was broad-based, short-term yields in the US …
19th May 2023
While banking sector strains have become less acute over recent weeks, core money markets remain tense as uncertainty grows around the potential fallout from even a temporary default on US Treasuries. Despite the recent failure of First Republic and …
18th May 2023