Author Archive

US FX intervention still someway off

The Trump administration has been focusing on the US’s trade deficit with some of its main trading partners such as China and Germany. A strong dollar is exacerbating this deficit and has visibly exasperated President Donald Trump. Indeed, the Fed’s broad dollar index was recently back close to its December 2016 high. In response, and […]

Gold boosted by dovish central banks

The gold price soared to a fresh five-year high on 20 June following a dovish Fed monetary policy meeting. Indeed, the dovish shift among major central banks (with the sole exception of the Norges Bank) and high global uncertainty have pushed global yields lower recently, reducing the opportunity cost of holding gold. Indeed, since late-2018, […]

US dollar update – path of least resistance remains to the downside

Despite a more dovish Fed, the US dollar has remained strong since the start of the year (as of 28 May, only the Canadian dollar and the Japanese yen had fared better). Weak global economic growth, notably as a result of trade tensions, has favoured the US dollar given its safe-haven status and high carry. […]

Limited room for Swiss franc depreciation

The Swiss franc has been supported by a structural current account surplus and by reduced investment flows out of Switzerland since the 2008 financial crisis. In addition, the decline in global yields since the Fed’s dovish shift early this year has rendered interest rate differentials less unfavourable to the franc. The upward pressure on the […]

Euro slides against the dollar on ECB dovishness

The euro fell to a 20-month low against the US dollar following the European Central Bank’s (ECB) March policy meeting, given the revised forward guidance that suggests that the interest rate differential is unlikely to provide much upside to the euro in the next few months. That being said, recent euro area PMI surveys tend […]

Limited upside for USD/JPY but significant downside

The Japanese yen has been weak recently, as volatility in the US stock market has receded. Indeed, the sharp increase in US stock market volatility at the end of last year favoured the yen through short-covering and repatriation flows, whereas the subsequent rebound in global risk appetite has penalised the defensive yen (see chart). This […]

Gold to consolidate before further leg up

Last year ended on a very strong note for gold demand, with a significant increase in jewellery and investment demand in the fourth quarter (see chart), leading to strong price performance (7.7% in US dollar terms in Q4). There was also a sharp increase in central bank demand in 2018, continuing a structural trend in […]

Reserve Bank of Australia’s upbeat stance turns upside down

On 6 February, Philip Lowe, governor of the Reserve Bank of Australia (RBA), sent clear dovish signals, indicating that a rate cut was now as probable as a rate hike. This led to a significant decline in the Australian dollar. This change in the RBA’s stance highlights increasing concerns around the Australian economic outlook. This […]

Emerging market currencies: idiosyncratic risks strike back

Despite a dovish shift by the Fed and the temporary truce in the US-Chinese trade dispute, the global environment remains challenging for emerging market (EM) currencies. In fact, our latestEM FX scorecard, which ranks 10 EM currencies according to key criteria such as growth and vulnerability to external shocks, is still unable to identify a […]

Emerging market currencies show encouraging signs for investors

Our EM FX scorecard, which ranks 10 EM currencies according to key criteria (such as growth and vulnerability to external shocks) saw few changes over the past month. The Fed’s current hawkish attitude remains a headwind for EM currencies, as it increases funding costs. That said, the weakest EM currencies have seen some stabilisation, particularly […]

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