USD to depreciate against the EUR, JPY and GBP towards year-end -CIBC

According to Andrew Grantham, analyst at CIBC, the US dollar is likely to slide against majors towards year—end but emerging market volatility could boost the demand for USD.

Key Quotes: 

“The median of FX forecasters don’t appear to have a strong view of what to expect from major currencies at the moment. Median expectations for year-end see GBP, EUR, JPY and CAD projected to be within 0.6% of the mid-week levels versus the US$. That’s often within the range of one trading day, and well below the range of projections a year ago. Economic fortunes have started diverging again, with the US leading and Japan and the UK lagging, which would typically produce a greater leaning in favour of the US$. The fact that it hasn’t could highlight an overvalued starting point for the greenback, which we expect to depreciate against the EUR, JPY and GBP towards year-end.”

“If emerging market volatility continues or worsens it could still seep over into other currencies, which would be a risk to our US$ depreciation story given the greenback would receive a risk-off bid. However, under the base case that emerging market volatility cools down and doesn’t spark dramatic shifts in major currencies, we expect a weakening in the US$ against most majors.”

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