Monthly Forecast: May 2019

Foreign Exchange - Monthly Forecast
May 2019
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Andrew Kositkun
Andrew Kositkun
Foreign Exchange Analyst
The USD spent the last month broadly range trading with a measure of USD volatility at a five year low. Looking ahead, we expect this trend to continue in the near term as the factors suppressing the USD's movement remain in place. Read more
Even since the Bank of Japan initiated its policy to hold Japanese yields around zero, U.S. yields have been a key driver for USDJPY. However, this relationship has been weakened due to consistent and strong demand from Japanese investors for foreign assets that have weakened the JPY despite a fall in U.S. yields. Read more
We maintain our forecast for a weaker AUD through the end of the year. We do acknowledge the AUD's run up over the past month due to positive developments to the Chinese economy and expectations for a near term resolution to U.S.-China trade talks. Read more
The euro finds itself roughly in the same place where it was about 6 months ago with EURUSD volatility and price range around their all-time low. While we still hold the view for mild appreciation in the euro by the end of the year, the offsetting forces that have left the euro range bound are likely to remain in place in the near term. Read more
Like the EUR, the CAD has been range bound over the past month as the economic surprises and disappointments have largely offset each other. To this point, the recent strong monthly GDP data came on the back of a string of disappointing prints leaving an overall picture of subdued activity. Read more
Year to date, the Chinese yuan has been one of the best performing Asian currencies. Positive developments on trade talks with the U.S. have improved sentiment around the yuan. However over the past month the CNY has been fairly range bound as trade talks with the U.S. have failed to make further progress. Read more
Three years of Brexit uncertainty apparently wasn't enough for the U.K. and the EU as the deadline has been extended, again, until October 31, 2019. Beyond this, everything else is pretty much unknown. The extension does nothing to close the impasse between the two sides. Read more
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This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
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