Our FX Markets Chart Pack has been updated with the latest data and our analysis of recent developments.
The dollar has rebounded in August but remains broadly unchanged on the year so far. We continue to think that it (and the yen) will rally over the second half of the year as the long-anticipated recessions finally takes hold in the US and other advanced economies, driving a deterioration in risk sentiment and increase in safe-haven demand. In addition, we think expected interest rates in most developed markets will drop back over the coming months, shifting rate differentials in favour of the yen. In addition, while the US economy is showing signs of fatigue it looks in better shape than the main European and Asian economies, suggesting the dollar is likely to outperform over the coming months.
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