AMERICAS Political and monetary policy developments in the USA will shape market sentiment through the remainder of the year. We maintain a bullish view for the USD on the grounds of interest rate and growth differentials. Both CAD and MXN will remain sensitive to USD gyrations, yet the latter might suffer from profit-taking headwinds (like BRL) affecting emergingmarket currencies.
EUROPE The resilience enjoyed by the EUR might face a fundamental test as the euro zone adjusts to new realities shaped by postBrexit vote dynamics and US interest rate normalization. We maintain a near-term bearish view for GBP on the back of deteriorating growth prospects in the UK which may trigger further aggressive action by the Bank of England. The RUB might also be subject to temporary correction.
ASIA-PACIFIC China will gradually return to global investors’ radar screens as the IMF prepares to welcome the RMB in the SDR mechanism. We still expect a gradual depreciation of the RMB to be guided by decisive (sometimes unconventional) official intervention schemes. The JPY will likely recover a gradual weakening tone as global capital flows jump into the strengthening USD wagon.