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Long-term US dollar cycle has probably peaked

The US dollar index has declined significantly this year, challenging our constructive view on the US dollar. Disappointment regarding potential US tax reform, the decline in US inflation, the significant overvaluation of the greenback and strong economic recovery in the rest of the world all help explain a large part of the US dollar’s decline. […]

Is there an end to the US dollar’s weakness?

Following disappointing US economic data and another failure to form a Republican majority on key legislation, the US dollar has slipped to a 10-month low, at 94.68 on 18 July. This extreme USD weakness has led to strong negative market sentiment, as highlighted by speculative positions on the futures market. Although we acknowledge that the […]

Major currencies’ outlook

Our latest forecasts for major currencies over the coming months can be summarised as follows: US dollar. In terms of duration and valuation, the USD up-cycle is likely close to ending. However, the USD is likely to remain strong on the back of robust US growth and the outlook for inflation. It should also benefit […]

The dollar should rebound in the coming months

The euro appreciated significantly against the US dollar (by as much as 1.4% at one stage) on 27 June, reaching a 10-month high. The main reaon was a speech by ECB President Mario Draghi at the ECB forum on central banking at Sintra. To a lesser extent, the ongoing struggle to find legislative consensus among […]

Too much pessimism surrounding the US dollar

The euro has significantly appreciated against the US dollar since the start of the year (roughly 7% by 8 June). The single currency has benefited from strong activity in Q1, higher inflation and reduced political uncertainties in the euro area, especially after the French presidential election. Meanwhile, the US dollar has been damped by weak […]

A more neutral tactical stance on the EUR/USD rate

The monetary policy meetings of the European Central Bank (ECB) on 9 March and of the Federal Reserve on 15 March have put upward pressure on the euro versus the US dollar. Euro area real rates have risen on prospects for an early rate hike whereas US real rates have declined on the perceived dovishness […]

Oil currencies offer limited potential

In 2016, the sharp rebound in oil prices and the November Opec deal to cut oil production have been supportive of oil-producer currencies like the Norwegian krone and Canadian dollar. However, we believe the oil price is likely to stabilise at around USD55 in 2017, close to where it already is. In an environment where […]

Currency opportunities emerge Down Under

At their February monetary meeting, both the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) kept their official cash rates unchanged at 1.50% and 1.75% respectively. However, given our view that New Zealand’s economic fundamentals are better than Australia’s, the temporary weakness of the New Zealand dollar that stemmed from […]

US dollar looks well supported this year

Our latest forecasts for individual currencies in 2017 can be summarised as follows: US dollar. The USD is likely to remain strong on the back of an improving US growth and inflation outlook as well as continued monetary policy divergence. Our base case scenario is for a Trump administration that puts the emphasis on growth […]

Limited short-term potential for dollar, yen will continue to weaken

US dollar/euro. The recent break to a fresh 14-year price low after 21 months of consolidation opens the way for a move towards parity in the EUR/USD rate in the next few months. Still, growth in the US is likely to be hurt in the coming months by the ongoing tightening in monetary conditions brought […]

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