Our review and outlook. Financial markets started 2018 with high expectations but soon were grounded by a different reality. What changed and what lies ahead for the second half? In our judgment, the divergences and tensions that marked the first half of the year will persist, continuing to influence currency markets and support the USD.
Summer sunshine warms the real economy. The moods of companies and consumers continue to suggest that growth rates in the industrialized nations will remain above average. Coupled with this, we note the forecasted slow increase in inflation. Together, this continues to narrow the scope for expansionary monetary policies. Our commentary.
Positioning for trade wars. As the drumbeat of trade wars grows louder, markets are trying to identify the currencies that might emerge as winners or losers. Ultimately, FX trends reflect fundamentals, and that includes the overall demand for, and supply of, goods, services and assets denominated in a particular currency. This FX story is bigger than just trade numbers.
The USD declined further in May as vaccination and recovery momentum increased in other economies...» more