Monthly Forecast: August 2019

A monthly commentary/summary that discusses our broader, long-term currency analysis.

August 2019 Share this story: Andrew Kositkun Foreign Exchange Analyst USD Last month the Fed delivered, in what it called a "mid-cycle adjustment," its first rate cut since 2008 and announced that it would accelerate the end of its balance sheet run-off. This cut completed the Fed's move from a rate hiking bias to a patient stance and now a rate cut. In justifying its move, the Fed cited the desire to boost inflation, a lower neutral rate as well as economic concerns, including trade tensions and global growth. However, the language from the meeting undermined the possibility of a September cut and the long rate cut path some were hoping for. Read more... JPY Over the past month, the JPY has been fairly range bound with USDJPY trading within a ~2 yen range. However this relative calm has the potential to be upended. Read more... EUR Since our last currency outlook, the Eurozone economy has continued to disappoint. While weakness has been fairly broad based, German weakness is of particular concern. Germany remains the EU's largest economy making the slide in German manufacturing and the distinct possibility that Germany's economy could post a contraction in Q2 growth particularly noteworthy. Read more... GBP The GBP is the worst performing G10 currency since our last currency update as the markets price in Boris Johnson's rejection of a backstop as well as his commitment to leave the EU by October 31 with or without a deal. Read more... CAD The CAD remains the top performing G10 currency on a YTD basis by a significant margin. This run of strength can be attributed to a combination of positive Canadian economic data and expectations for Fed rate cuts. With the BoC expected to be on hold and the Fed expected to cut rates, there remains scope for further near term strength. However, the extent of this strength will remain dependent on the Canadian economy's ability to outperform, the extent that the Fed will cut further and the extent that the BoC follows the Fed's lead. Read more... AUD After delivering back to back rate cuts at its June and July meeting in order to spur inflation, the RBA appears to be sidelined for its August meeting. This pause from the RBA has given near term support to the AUD. However it is important to remember that the pause from the RBA is not a sign that the rate cutting cycle is over but rather to allow prior cuts to work their way through the economy as illustrated by RBA Governor Lowe's comments that he was prepared to lower rates again. Based on comments from the RBA, the labor market is a key indicator that they are watching. Read more... CNY Since May, the CNY has reached an uneasy stabilization as markets await the next phase of the US-China trade talks post the G20 truce. From a historical context, this narrow trading range is a typical holding pattern during Chinese negotiations on the international stage. A similar pattern was seen leading up to the CNY's inclusion into the IMF's special drawing rights basket. Read more... Read More If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133. Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos! Follow City National Bank on social media: Non-deposit investment products: • Are not FDIC insured, • Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and • Are subject to investment risks, including possible loss of the principal invested. 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. 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