In their 2019 Currency Outlook report, Tempus, an exchange rate and global payments company, provides a detailed report including the following topics and sections:

In Brief

• The Fed kept with the plan of raising interest rates four times, thus raising the USD by 3.4%
• Cryptocurrencies fell dramatically as did regular equity markets by year-end, with the Dow Jones weakening 6.4% in 2018
• The European Central Bank finished its bond intervention, but slow economy and pollical pressures decreased the Euro by 5%
• Brexit pressures lowered business confidence and caused a political crisis, sinking the Pound by 6%
• Emerging and commodity markets suffered as MSCI Emerging Market Growth and Currency Indices fell 22% and 4.4% respectively
• As a result of “Trade War” concerns and doubts on future Fed action rendered the forth quarter the worst for NASDAQ since 2018 and the Dollar followed suit
• Despite three rate hikes, the Canadian Dollar fell by 8.3% due to an oil glut, concerns over NAFTA ending and the escalation of trade tariffs
• The best performer of 2018 was the Japanese Yen, as it rose by 2.4% based on its safe-haven status
• The large economies were tested as housing markets and business investment slowed in the U.S. and China saw growth slow
• The Mexican Peso was the least affected currency, dropping only .5% in value with a new government and a trade pact

In Focus
The U.S. Dollar went on the defensive in 2018, forming a “U” pattern in the last two years, indicating recovery.

The View – A strong economy backing the U.S. Dollar may fade

• Consistency has been the U.S. Dollar’s strength as it has managed to achieve record highs in gains and revive the labor markets for the last ten years
• Doubts on the economy at the beginning of 2018 influenced the tapering of the Dollar’s growth in appreciation between 2013 and 2017
• Although the Fed’s decision to hike rates four times in 2018 made sense as economy kept rolling with inflation, many are concerned that the fed may have done a disservice by hiking rates too quickly, which could result in similar conditions that caused a recession ten years ago
• Doom-and-gloom scenarios could materialize in the U.S. if businesses are unable to make decisions long-term due to political gridlock
• Per the International Monetary Funds projections, the global economy should grow by 3.7% in 2019 and the Fed anticipates the U.S. growth as 2.3%
• The European Central bank is anticipated to wait until 2020 to consider raising interest rates due to uncertainty
• Complete disaster never struck the UK during the more than two years of trying to solve the Brexit conundrum
• The only currency that won against the USD in 2018, the Japanese Yen, may face wild swings in 2019 as global markets continue to figure out where to go in the midst of many trading conflicts
• The new Mexican Government will focus on infrastructure, including a new Mexico City airport
• The Mexican Peso saw a comeback from its worst exchange rates on record during 2016 and 2017
• Canada will aim to grow stronger after seeing downward GDP swings since 2017

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.