Currency outlook: Global central banks begin to normalize policies

Invesco Fixed Income shares its views of currencies around the world

US dollar:

Our strong global growth view indicates a mixed environment for the US dollar. We expect the US Federal Reserve to hike interest rates two more times in 2017. However, we believe other major central banks have more significant moves to make in terms of normalizing their policies. Global policy normalization should favor currencies of countries whose central banks are scaling back their quantitative easing (QE) programs — for example, the euro versus the US dollar.

Euro:

We continue to be

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Interest rate outlook: Eurozone economy now in “Goldilocks” phase

Invesco Fixed Income shares its views of rates around the world

Europe:

The risks around the French elections are now behind us, and we are unlikely to face a far right insurgency in the next electoral test: Germany. In the background, European data continue to be solid and resilient to political risks. Given the French election’s market-friendly outcome, we expect a renewed focus on fundamentals and European Central Bank (ECB) watching going forward. As post-election short covering winds down, we expect European core yields to resume their upward trend and peripheral spreads versus German bunds to widen again. The periphery could come under more pressure in the unlikely event that early elections are held in Italy.

US:

Stronger global growth is likely to be

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Currency outlook: European economic activity continues to improve

Invesco Fixed Income shares its views of currencies around the world

Euro:

Our outlook for the euro remains constructive over the medium term. European economic activity continues to improve and should eventually allow the European Central Bank to pivot on quantitative easing (QE) and embark on tapering. We expect the euro to appreciate in this environment and this may unfold in Q2/Q3 this year. In general, we believe QE has approached its conclusion and policy adjustments going forward are likely to be skewed toward supporting longer-term euro strength.

Renminbi:

We expect the Chinese currency (onshore and offshore) to trade on the

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Interest rate outlook: European markets return to fundamentals

Invesco Fixed Income shares its views of rates around the world

Europe:

The risks around the French elections have decreased tremendously following the comfortable Macron victory in the May 7 election. At the same time, data out of Europe continue to be solid and resilient to political risks. Given the French election’s market-friendly outcome, we expect a renewed focus on fundamentals and European Central Bank (ECB) watching going forward. As post-election short covering winds down, we would expect European core yields to resume their upward trend and peripheral spreads versus German bunds to widen again.

US:

We are constructive on global growth and believe it will exceed market expectations. Although we expect

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Interest rate outlook: Global growth could push US yields higher

Invesco Fixed Income shares its views of rates around the world

Waldner_Rob_sm_150dpi_RGBAt Invesco Fixed Income, we believe strong global growth should ultimately pressure US interest rates upward as global monetary policy tightens. In the short term, however, the US Federal Reserve (Fed) has indicated that it does not intend to tighten interest rates quickly. Moves from other central banks, such as the European Central Bank (ECB), will likely drive price action in longer-dated US Treasuries, in our view. As global growth continues to improve, other global central banks’ actions may catalyze a move higher in US Treasury yields.

Below is an overview of the Invesco Fixed Income team’s outlook for interest rates in other key world economies:

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