Monex ranked top forecaster for 1-month MXN and BRL forecasts

FX forecasts and associated rankings are published on behalf of Monex Europe and Monex Canada.

The Federal Reserve’s hawkish shift in June caught markets off-guard and resulted in broad US dollar strength throughout the remainder of the month. Despite calling for further dollar depreciation, Monex’s conservative stance on further dollar downside meant shorter-term forecasts (1-month/ 3-month) weathered the storm of a stronger dollar relatively well. This was especially the case within the EM space, where traditionally high-yielding currencies such as RUB, MXN and BRL continued to rally against the greenback.

Looking ahead, we have held our expectation of a broad depreciation in the US dollar, but have raised the starting base to reflect June’s price action and the Fed’s current stance.

Select currencies, namely JPY and CNY, are outliers to our expectations of a weaker dollar, largely due to their increased sensitivity to rising US yields relative to peers.

G10

A stronger dollar in the wake of the Fed’s June decision meant that most of our 1-month forecasts in the G10 space failed to rank highly. However, our longer-term forecasts continued to rank well as the dollar’s initial rebound wasn’t as seismic within a longer-term context.

Stability in the EURGBP rate over the 1-month horizon highlights how idiosyncratic factors were largely absent in FX price action, with currencies trading on broader USD dynamics instead. Over the course of the next month, we continue to see broad USD dynamics as a dominant driver of G10 price action, with idiosyncratic factors and diverging monetary policy stances set to play  an increasing role over the 3-to-12-month horizon.

FORECASTS

Emerging Markets

Monex’s EM forecasts fared much better than the G10 forecasts over the 1-month horizon. Traditionally high-yielding currencies, such as RUB, MXN and BRL, saw exceptionally high rankings as domestic interest rate hikes negated the impact of rising US yields in the aftermath of the Fed decision. Over the coming quarter, we continue to expect a strong EM performance against the dollar, with the exception of CNY and TRY.

FORECASTS

Author: Simon Harvey, Senior FX Market Analyst

Disclaimer

This information has been prepared by Monex Canada Inc., an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Inc., or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication.