The Xe Global Currency Outlook - August 2024

Welcome to Xe’s Global Currency Outlook, your go-to resource for understanding the dynamic world of currency exchange. Each month, we’ll bring you the key insights and trends shaping the global currency landscape..

Here’s what to watch in August 2024:

JPY Volatility and Impact:
The Japanese yen (JPY) suddenly became stronger in early August due to concerns about the U.S. economy, an unexpected rate hike by Japan's central bank, and many traders exiting their short positions in JPY. This led to significant swings in currency values, with currencies like the Australian dollar/Japanese yen (AUD/JPY) dropping sharply. This volatility could calm down once the JPY stabilizes.

USD Outlook:
The U.S. dollar (USD) is likely to weaken by the end of the year because the U.S. economy is slowing down, and the Federal Reserve plans to cut interest rates starting in September.

EUR/USD Prospects:
The euro is expected to rise against the U.S. dollar for three main reasons: it’s a safe alternative as the USD weakens, the Eurozone economy is showing signs of improvement, and the Eurozone’s current account surplus has grown significantly.

GBP Pressure:
The Bank of England reduced interest rates on August 1, which could cause the British pound (GBP) to decrease in value. The U.K. has a large current account deficit, making the GBP sensitive to interest rate changes.

Canadian Dollar Challenges:
The Canadian dollar may perform poorly because Canada's economy is weakening, along with a slowdown in the U.S., which is a major trade partner. Canada’s unemployment is at a high, inflation is easing, and the central bank is likely to cut interest rates.

Chinese Economy and CNY:
Despite economic struggles due to a property crisis, China’s yuan (CNY) might strengthen as it tries to match the rising JPY and benefits from the weakening USD.

AUD Strength:
The Australian dollar (AUD) is expected to strengthen as the Reserve Bank of Australia (RBA) focuses on controlling inflation. Australia's strong demand and slow productivity growth mean the RBA might keep or raise interest rates, boosting the AUD.

NZD and RBNZ Policy:
The Reserve Bank of New Zealand (RBNZ) is likely to lower interest rates, which could lead to a weaker New Zealand dollar (NZD). Even with rate cuts, the policy will remain relatively tight.

MXN and ZAR Developments:
The Mexican peso (MXN) and South African rand (ZAR) have started to recover as political issues ease. Both currencies are expected to rise modestly as the USD weakens.

Stay tuned for more updates and insights next month as we continue to navigate the ever-changing world of global currencies.

The content within this blog post is not intended for use as financial advice. This content is for informational purposes only.