G10 currency forecasts for 2015
09/Dec/2014 • Currency Updates•
In early November we released our revised FX forecasts for emerging markets and now it is time for our G10 currency review, which includes rate forecasts for each G10 currency up until the end of 2015.
Our last G10 forecasts were built around the theme of strong USD appreciation against all major world currencies. Events since have largely validated these expectations, and the US Dollar has reached or exceeded our 2014 year-end targets against all other G10 currencies.
The key factor driving currency markets continues to be the divergence between the direction of monetary policy of the Federal Reserve and that of the Eurozone and Japan. While the Fed gets ready to hike rates, most likely at some point in the second quarter of 2015, the European Central Bank and the Bank of Japan have shocked markets with announcements for further monetary easing now that rates have hit zero. The Bank of England, meanwhile, appears to navigate a course closer to that of the Federal Reserve than the ECB, albeit any interest rate hikes in the UK will come later than in the US and at a slower pace. Most other G10 central banks are either easing or already at zero rates, as disinflationary pressures everywhere in the advanced economies have become the norm and inflation targets are increasingly being missed from below rather than from above.
In this context, we see nothing in the medium term that will reverse the well-established trend towards US Dollar appreciation alongside Euro and Yen devaluation, with other G10 currencies falling somewhere in between these two extremes, mostly according to the stands of their respective central banks.
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