A monthly commentary/summary that discusses our broader, long-term currency analysis.
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Andrew Kositkun Foreign Exchange Analyst
After taking a dovish turn in January, the Fed doubled down on its dovish pivot in March by downgrading its economic outlook, removing all projected rate hikes for 2019 and tapering its balance sheet normalization plan that will ultimately end in September this year with the balance sheet at the high end of its projected range. Read more...
The big development for the euro, since our last currency update, has been the more-dovish-than-expected change from the ECB. At its most recent meeting, the ECB pushed back rate hike guidance from this summer towards the end of 2019. Moreover, several members appear to be in favor of a longer delay than the bank ultimately signaled. The central bank also took down its GDP and inflation forecasts as well as launched additional easing measures. Read more...
The GBP has proven to be a difficult currency to forecast given the drastic differences of possible outcomes combined with the fluid nature which makes it difficult to handicap the probability for each Brexit possibility. But, to be honest, the business end of Brexit has always had the potential to be chaotic both from a political and market point of view. Read more...
After a period of sharp appreciation in December 2018, the JPY has spent 2019 steadily depreciating despite US 10 year yields moving down during the same period. In our view, this was driven by two key factors. Read more...
A key development for the CAD since our last outlook was the Bank of Canada (BoC) joining other DM central banks in adopting a dovish outlook. At the BoC's March meeting, the bank, for the first time since the start of the current rate normalization cycle, did not judge current or future rate hikes to be warranted. Instead, the BoC adopted a neutral stance and stated that it believed the economic outlook warranted a policy interest rate that was below its neutral range. Read more...
The Reserve Bank of Australia (RBA) has joined the ranks for dovish DM central banks. As a result, markets have materially increased the probability of a rate cut this year, with some analysts calling for 2 cuts in 2019. This pivot marks a significant change from the "glass half-full" view that the RBA had and a ~40% chance for a hike only a couple months earlier. Read more...
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