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Currency Predictions - US Dollar Remains Under Pressure - Citi UK

22 August 2017FX
Currency Predictions - Citi UK

The US dollar's gains last Friday were short lived as investors await the Jackson Hole meeting of central bankers later this week to guide currency markets.

USD: Jackson Hole and return of US Congress key to the dollar's near term outlook

The USD's gains last Friday were short lived as investors await the Jackson Hole meeting of central bankers from August 24-26 to guide currency markets. The return of the US Congress on September 5 to discuss issues surrounding tax reform, healthcare, the debt ceiling and possibly infrastructure will also be important for the direction of the US dollar. At the same time, in Citi's view, the path of interest rate hikes going into December and 2018 is dependent on inflation picking up in the US.

EUR & GBP: EURUSD to move higher

The EURUSD climbed towards to a high of 1.1830 overnight following a recirculated Wall Street Journal article indicating that European Central Bank President Draghi is likely to lay out plans to taper the bank's asset purchases at Jackson Hole this week.

AUD, NZD & CAD likely to be range bound this week

  • Investors may start to focus on the elections in New Zealand in September given that the election outcome may impact the Reserve Bank of New Zealand's mandate.
  • The AUDUSD appears stuck in a range with USD weakness limiting the downside but weaker domestic fundamentals capping the currency's strength. A similar outcome is likely for the NZD and CAD against the USD although both are expected to be more resilient than the AUD.

Asia EM: Monetary Authority of Singapore to leave policy unchanged in October

Citi analysts expect Singapore's headline inflation to moderate to 0.3% as lower private transport costs offset the impact of water tariff hikes. Higher core inflation may lead investors to expect the Monetary Authority of Singapore to tighten policy at the upcoming meeting in October although this is not Citi analysts' base case.

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