Currency outlook: US dollar may be pressured as investors seek more promising growth opportunities elsewhere

Invesco Fixed Income shares its views on currencies around the world

Time to read: 3 min

US dollar:

Underweight. The US is in the later stage of its economic cycle relative to the rest of the world, in our view. We expect the Federal Reserve to grow cautious while other central banks continue tightening. The dollar should be pressured weaker as investors look for better growth and return opportunities elsewhere. However, the fundamental picture has been muddied recently, with growth data disappointing relative to expectations — resulting in a mixed performance for the US dollar. We believe this is a short-term correction in market expectations for both US and global growth. We are watching the data closely to be sure that constructive fundamentals are still intact and this is not the start of a downward trend.

Euro:

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Currency outlook: Deflationary risks dissipate across global economies

Invesco Fixed Income shares its views on currencies around the world

Time to read: 3 min

US dollar:

Underweight. We expect the US dollar to continue to depreciate, driven by global growth and converging central bank policies. Strong global growth suggests a shift away from US assets — this would weigh on the dollar. We continue to forecast a total of three rate hikes by the US Federal Reserve (Fed) in 2018, with a risk of four if inflation accelerates. However, recent stability in inflation data is likely to prevent the Fed from taking a more hawkish stance in the near term.

Euro:

Overweight. We continue to forecast further euro appreciation due to

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Currency outlook: Global trends continue to pressure US dollar

Invesco Fixed Income shares its views on currencies around the world

Time to read: 3 min

US dollar:

We expect the US dollar to continue to depreciate due to ongoing global economic growth and converging central bank policies. We have revised our 2018 US Federal Reserve rate hike call from two to three, in line with US bond pricing. While recent inflation strength has raised the possibility of four rate hikes, we believe that is unlikely without significant wage pressures. Globally, the growth trend is expected to be stronger relative to the US, meaning non-US central banks should shift away from their accommodative stances, especially the Bank of Japan (BOJ) and the European Central Bank. There may be a demand shift away from

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Currency outlook: Possible global central bank policy surprises could suppress US dollar

Invesco Fixed Income shares its views on currencies around the world

Time to read: 2 min

US dollar:

We expect the US dollar to weaken throughout 2018. We base our view on positive global growth and predicted changes in global monetary policy. While we believe US growth will maintain its strengthening trend, growth across the developed world (especially in Europe and Japan) is likely to be even stronger. Global central banks, especially the European Central Bank (ECB) and the Bank of Japan (BOJ), are likely to tighten policy in response. We believe market expectations of policy tightening are currently much lower for the ECB and the BOJ compared to the Federal Reserve, which means there is more room for a market surprise that could cause their currencies to rise against the US dollar. In addition, strong global growth environments have historically led to a weaker US dollar, as US investors seek higher risk premia abroad and non-US investors stay home. We do not believe corporate repatriation flows will be a large driver of US dollar price action. Foreign profits are already largely held in dollar-denominated assets, and repatriation is likely to occur over many years.

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Currency outlook: Anticipating a weaker US dollar over the longer term

Invesco Fixed Income shares its views on currencies around the world

Time to read: 3 min

US dollar:

The US dollar has strengthened in recent months on expectations of a December rate hike by the Federal Reserve (Fed). We do not expect strengthening to be the longer-term trend, however. Strong global growth, resulting in less accommodative global central bank policies against a backdrop of gradual Fed policy normalization, is likely to drive the US dollar weaker over the longer term.

Renminbi:

We expect the USD/RMB exchange rate to trade

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