Video Series:

Macro asset-classes

“After an inconclusive 1H, the Fed’s unexpected hawkish pivot has the makings of a bullish watershed for USD. The shift in the Fed’s reaction function is most clearly bullish for USD vs. low-yielding reserve currencies. The historic sensitivity of currencies to U.S. Treasury yields has proven useful and should largely remain the case in 2H.” Paul Meggyesi, Global Head of FX Strategy

Currency Forecasts: We maintain a medium-term bullish view for 1Y EUR/USD at 1.16 but have lowered GBP/USD from 1.40 to 1.38 We also raise the USD/JPY forecast from 107 to 112 and USD/CNY from 6.35 to 6.45.

High-beta FX: Strong global growth and in some cases, hawkish central banks, should support cyclical FX. However, we don’t exclude the possibility of a broader-based rally in USD, especially given the challenge the Fed has set for the recovery trade in general.