Sterling has seen underperformance after dovish comments from internal members of the Monetary Policy Committee (MPC) of the Bank of England (BoE). The dollar, on the other hand, has returned to consolidation mode. The European Central Bank's (ECB) vice president, Luis de Guindos, has hinted at a potential rate cut in June and emphasized the importance of Federal Reserve (Fed) policy for the global economy. The deputy governor of the BoE has suggested that conditions are falling into place for a rate cut. Additionally, the National Bank of Hungary is expected to slow the pace of easing. These developments have implications for the exchange rates of sterling, the dollar, and the euro.
Managers express confidence in sterling's performance, but uncertainty surrounding the UK and global economies, as well as the upcoming general election, could pose headwinds. Sterling has shown strong performance in 2024, making gains against the euro and Japanese yen. It has also held its own against the US dollar, the only currency that has outperformed it among G10 economies. The uncertainty is attributed to the upcoming general election and the global economic situation. Managers remain optimistic about sterling's future potential. The article discusses the G10 FX forecasts and the potential for easier monetary policy in various currency pairs. The forecasts include the EUR/USD, USD/JPY, GBP/USD, EUR/GBP, EUR/CHF, USD/CAD, AUD/USD, NZD/USD, EUR/NOK, EUR/SEK, EUR/DKK. The article highlights the factors influencing each currency pair and the potential for rate cuts or hikes by central banks. It also mentions the impact of US elections on FX markets and the role of inflation in monetary policy decisions.
According to a recent article, the outlook for risk-on currencies in Q3 2024 is positive. The US dollar is expected to weaken as the Federal Reserve eases monetary policy and the US economy faces uncertainties due to the upcoming elections. High beta currencies such as the Swedish krona, Norwegian krone, Australian dollar, and New Zealand dollar are likely to outperform in a dollar-bear environment. Low-yielding currencies like the Japanese yen and Swiss franc are expected to underperform. In the emerging markets, carry trades may remain popular, but a more tactical approach with tighter risk management is advised. The article also mentions the importance of monitoring the volatility index, election calendars, and yield spreads. Overall, risk-on currencies are expected to surge against havens in Q3 2024. [8bc2c6b3] [7dfbd182]