Monthly Forecast: December 2018

Foreign Exchange - Monthly Forecast
December 2018
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Andrew Kositkun
Andrew Kositkun
Foreign Exchange Analyst
The DXY (USD index) moved between strength and weakness this past month but ultimately remained broadly unchanged. Many of the same risks remain, with some trade conflicts in a "ceasefire" mode but materially unresolved. Read more...
Over a 1 month horizon, the euro traded broadly flat with price action choppy but the currency ultimately remaining range bound. While we remain constructive on the euro in 2019, we expect the euro to remain pressured in the near term. Macro-economic divergence with the US should continue with US economic measures remaining strong and German economic data contracting for the first time in years without any sign of an imminent uptick. Read more...
As noted in prior commentaries, the GBP has been moving up on the back of positive Brexit headlines. However we also noted that it was difficult to feel confident in the move as a Withdrawal Agreement was just the first step in a long and contentious process. Read more...
On a year to date basis, the JPY has been relatively flat but since April, the currency has been on a broad weakening trend as US yields have been on the rise. Over the past month, the JPY has been one of the worst performers in the G10. Read more...
Throughout the year, we cited NAFTA negotiations as a key driver for the CAD. This was confirmed as the CAD strengthened sharply after the United States-Mexico-Canada Agreement (USMCA) was announced. Read more...
YTD, the AUD has remained on a downward trend, driven by divergence between the RBA and Fed, as well as slowing Chinese growth and trade concerns as the Australian economy is export heavy with close ties to the Chinese economy. Short AUD positions remain at near 1 year highs and have been used by the markets as a hedge for trade war fears. Read more...
After a period of sharp depreciating pressure on the CNY starting in April, the currency has stabilized over the past couple of months. 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. The 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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