In their September 2018 Currency Outlook report, Tempus, an exchange rate and global payments company, provides a detailed report including the following topics and sections:
In Brief
- The USD returned to gains, climbing .5% in August against the other major currencies
- Commodity markets are suffering from instability and the MSCI Emerging Market Currency Index is down 8%
- Safe-haven assets surged as the Japanese Yen went up .5% and the Swiss Franc went up 2.2%
- Australia ousted Prime Minister Michael Turnbull and the Australian Dollar fell 3%
- NAFTA nations resumed talks to revamp the agreement
- The British Pound continues to depreciate and lost 1.2% of its value due to Brexit concerns
In Focus
The anticipated August currency swings came and the Bloomberg Dollar Spot Index currencies inflated and fell.
The View – It’s difficult to anticipate where the US Dollar will go from here
- On paper all signs point to a healthy US economy: GDP, manufacturing, retail sales and business confidence are all improving
- Forces that may push against the USD’s value surge do not have precedent for using history to anticipate the currency’s future moves
- The Fed’s rate hikes have been criticized by the Trump administration as too aggressive and may be a detriments to the administration’s agenda
- Attention must be paid to statements about how the central bank manages monetary policy
- European and Chinese officials showed concern about the aggressive re-negotiation deals with the call for billions in tariffs
- Many investors were turned off by the thought of intervention in the foreign currency market to help in devaluing the USD
- Revision of old deals may be necessary, but this may lead to retaliation as barriers are presented as future threats. Tone of revisions may need to change as there have been hits to famers, the home appliance industry, as well as others
- The progress in economic growth needs to be sustained, otherwise the USD will face a major decline by the end of 2018 or the beginning of next year
- Global instability of currency is keeping the USD buoyant as other nations struggle to cope with uncertainty over free trade and mixed monetary policy signals
- Difficult situations in Turkey, Argentina and Venezuela are only serving to push the USD higher
- Deep financial ties between Europe and emerging markets that are struggling have caused the Euro to decline in August
- The British Pound, Canadian Dollar and Mexican Paso fell by a combined average of 2% due to fear over trade agreements and confusion
- The Parliament in the UK will be back in session to oversee the Brexit situation
IBC Members can download the complete Currency Outlook from the members-only section of the IBC website under the Special Reports section. IBC membership is free for all regular IHA members – to learn more and to join, visit the IBC membership information page.
