Over the course of May, the dollar downturn exceeded our expectations, while for certain currencies, market participants preemptively priced in the economic reopening as vaccine optimism picked up. Taken together, this resulted in currency pairs like GBPUSD and EURUSD outperforming our previous 1-month view. After making the relevant near-term adjustments, we now see the dollar’s decline slowing as Fed members begin to voice the need to discuss QE tapering in upcoming meetings, while much of the positive sentiment around major economies reopening has been priced into currency markets. There are exceptions to our expectation of US dollar weakness, however, with CHF, CNY and TRY expected to weaken against the greenback over the 12-month horizon.
You can now read Monex Europe’s latest FX Forecasts report in full by clicking the download link below.
Simon Harvey, Senior FX Market Analyst
Olivia Alvarez Mendez, FX Market Analyst
Ima Sammani, FX Market Analyst