MTFX Currency Update, February 2024

FX Monthly Currency Forecast

Currency Pair

Feb 03, 2024 SpotMar 2024 (Q1)Jun 2024 (Q2)Sep 2024 (Q3)Dec 2024 (Q4)

USD/CAD

1.35

1.37

1.31

1.33

1.33

EUR/CAD

1.45

1.47

1.48

1.50

1.50

GBP/CAD

1.70

1.73

1.70

1.70

1.71

EUR/USD

1.08

1.08

1.10

1.11

1.13

GBP/USD

1.26

1.26

1.28

1.29

1.30

USD/JPY

148.39

143.67

140.67

137.00

133.67

USD/CHF

0.87

0.88

0.87

0.87

0.87

USD/CNY

7.19

7.17

7.17

7.10

7.03

USD/INR

83.01

83.00

82.50

82.00

81.50

AUD/USD

0.65

0.66

0.66

0.67

0.69

NZD/USD

0.61

0.62

0.63

0.63

0.65

USD/MXN

17.15

17.63

17.73

17.78

17.48

 

Currency Views

USD

US job growth and wage increases have led the Federal Reserve to reconsider an expected March rate cut. Though still possible, the delay will likely strengthen the US dollar in the short-term. However,heading into the second half of the year, a weakening USD is forecasted driven by differing central bank policies, foreign hawkish stances, US deficit spending, and dollar overvaluation concerns.

 

CAD

The CAD's recent gains reversed in January, influenced by a stronger US dollar and reduced hopes for Federal Reserve policy easing, as US economic data outperformed. Despite global risks, the loonie has remained resilient, though the Bank of Canada's neutral stance and pause in rate hikes have weighed. Future monetary policy shifts by the BoC will be key in 2024, with rapid rate cuts by some countries possibly leading to more currency depreciation, affecting the CAD.

 

USD/CAD Forecast - Q1 2024: 1.36 | Q2 2024: 1.34 

EUR

The ECB may delay interest rate cuts until mid-year, with the EUR fluctuating between $1.0815 and $1.10 in January, hinting at a possible further correction post-Q4 2023's rally. Despite a better external balance post-Ukraine crisis disruptions, the eurozone's domestic growth is weak, and the outlook for the first half of the year is subdued. The region faces economic and political challenges, highlighted by Germany's unstable coalition and France's political shake-up with President Macron dismissing his prime minister.


EUR/USD Forecast - Q1 2024: 1.07 | Q2 2024: 1.10

GBP

Since mid-December, the British pound has been stable between $1.2600 and $1.2800. The Bank of England (BoE) is likely to advocate for policy patience at its next meeting, citing misalignment between wage growth and CPI targets. The upcoming March 6th budget's potential for fiscal stimulus adds to policy complexity, delaying possible BoE easing until August. Although higher interest rates could support the GBP, concerns about electoral risk and economic stagnation may impact market sentiment.

 

GBP/USD Forecast - Q1 2024: 1.25 | Q2 2024: 1.27 

JPY

In January, the yen fell 4.6% against a backdrop of rising US rates and expectations that the Bank of Japan would postpone rate hikes until at least April. The US dollar, which had dropped to JPY140 in late December 2023, rebounded to nearly JPY149 by the end of January. Despite Japan's economic challenges in the latter half of 2023, including a 3% contraction in Q3, the yen is expected to strengthen in 2024. This optimism is based on several factors: decreasing global inflation and yields, a possible Bank of Japan rate hike, and a reduced energy trade deficit, all potentially boosting yen demand.

 

USD/JPY Forecast - Q1 2024: 147 | Q2 2024: 144

CNY

Despite efforts to lift market confidence, including an unexpected Reserve Requirement Ratio (RRR) cut on January 24th, foreign investors remain wary about China's medium-term demand recovery. Earlier measures, like the issuance of a RMB 1 trillion special sovereign bond and a RMB 1 trillion stabilization fund for equities, only sparked short-lived rallies. Beijing has kept the exchange rate stable, expected to continue until there's a shift in US policy, but these efforts have yet to dispel persistent investor pessimism in Chinese markets.

 

USD/CNY Forecast - Q1 2024: 7.20 | Q2 2024: 7.25 

INR

The Indian Rupee may strengthen despite RBI interventions, thanks to a narrowing current account deficit, expected strong portfolio inflows from bond index inclusion, and positive economic indicators such as increased vehicle sales and steel consumption.

 

USD/INR Forecast - Q1 2024: 83.00 | Q2 2024: 82.50 

AUD

The recent job data indicates a cooling labor market, yet it's too soon for the Reserve Bank of Australia (RBA) to ease policies after its November rate increase. RBA rate reductions might be delayed until Q3 or beyond, awaiting the Federal Reserve's actions. Steady RBA policy, possible Fed cuts, and a robust Australian services sector are expected to stabilize the Australian dollar, despite China's economic challenges. The AUD/USD will mainly respond to Fed outlooks, with minimal AUD depreciation expected, and any positive shifts in China could bolster the aussie dollar.

 

AUD/USD Forecast - Q1 2024: 0.66 | Q2 2024: 0.67 

NZD

The New Zealand dollar's recent fluctuations reflect changes in the US dollar, with its December gains reversed by a strengthening US dollar in January, due to higher yields and speculation on the Federal Reserve delaying easing. The Reserve Bank of New Zealand (RBNZ) surprised with a hawkish hold in November, raising OCR forecasts and hinting at future rate hikes, particularly emphasizing inflation concerns from immigration. This contrasts with the Reserve Bank of Australia (RBA) and the Federal Reserve, suggesting the RBNZ may delay rate cuts, likely supporting the New Zealand dollar's value.


NZD/USD Forecast - Q1 2024: 0.62 | Q2 2024: 0.63

MXN

The Mexican peso weakened in January due to strong US economic data. Factors like carry trades, remittances, and manufacturing exports, which supported the MXN in 2023, may now present challenges. November saw remittances grow by just 1.9% year-on-year, the smallest increase since April 2020. Vehicle production fell 9.9% year-on-year in December, marking the first drop since April 2022 and the largest since December 2021. Upcoming presidential elections in Mexico and the US, along with potential volatility from Trump's actions, could add further uncertainty to the peso's outlook.

 

USD/MXN Forecast - Q1 2024: 18.00 | Q2 2024: 18.20 


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