In their June 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 USD reached its strongest level in 2019, dwindling in the final day of May
• After major swings, the USD rose by less than half of a percentage according to the Bloomberg Dollar Spot Index
• Safe-haven Japanese Yen and Swiss Franc rose 2.3% on average due to escalation of trade woes and tariffs
• The GBP slid by 3.2% as Theresa May was forced to step down as Prime Minister
• After a tough month the Euro fought back at the month’s end and only lost .2% of its value
• Unresolved trade issues and commodity prices falling caused MSCI Emerging Market Currency to dip 1.3%

In Focus
The Mexican Paso lost momentum band fell 3.6% in May

The View – The USD’s surge is slowed by tariff effects and dovish Fed 

• Between the mid to end of 2018, economists anticipated that the Fed would be consistent in keeping interest rate hikes as part of the 2019 strategy
• Officials had to take a step back to look at he stagnation in the world’s economy and decided that an increase in borrowing costs could not be afforded, thus a likely return to rate cuts
• The USD has benefitted in recent years due to the U.S.’s ability to return to a healthy, growing economy
• A tech boom and gains in finance were signs of a thriving economy in the U.S., along with the Down Jones Industrial Average’s growth of 56% from the start of 2016 to the end of 2018, with jobless claims at the lowest level in four decades
• The Fed tightened monetary policy as the equity markets served as indicators of a return to prosperity, however, with the market now faltering, lowering of interest rates by the Fed is forecasted for the second half of 2019
• Other nations whose central banks were anticipated to tighten monetary conditions by higher rates and reduction to easing measure are moving in the opposite direction
• One such example of easing measures is that of the Bank of Australia, cutting rates from 1.5% to 1.25%, after much speculation and reaction by the markets, it was negative as the Australian Dollar rebounded after losing value based on worries regarding China’s demand for Australian raw materials and services during trade disagreements
• This renewed optimism can be viewed from the perspective of economic uncertainty – if a country’s central bank is willing to act and interview in aiding the economy, it can ben viewed as a positive development, stabilizing and appreciating the value of the country’s currency against the USD
• With many questions unanswered, and an accommodative environment, not a lot can be done with rates stand at 0.00% in the EU and .75% in the UK with the woes of Brexit and the separatist sentiment both needing solutions to recuperate faith in those markets
• Following EU Parliamentary elections, there is no clear majority and such diverse political viewpoints means that there will need to be compromise to main an intact EU

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.