Currencies Outlook

Investors have scaled back the number of rate cuts they expect from the Fed. This is putting upward pressure on the dollar but also increasing problems in Asian countries in particular. As a result, currency interventions to weaken the dollar seem increasingly likely....
 

The widening interest rate differentials between the dollar and the euro, paired with upward pressure on commodity prices, increase the risk of a further decline in EUR/USD…

Growth differentials point to a decline in the euro against the dollar and pound. Furthermore, despite the prospect of currency interventions by the Bank of Japan, we do not expect a trend reversal of the yen against the euro and dollar in the short term.