Forex Weekly

Each week, we publish our Forex insights. Check regularly this space for up-to-date information. You can also contact us and enroll to receive our publication each week directly in your inbox by writing to

Pier-Luigi Bonelli Foreign Exchange Advisor
José-Manuel Luna Foreign Exchange Advisor
Ugo Biancaniello Foreign Exchange Advisor

The global recovery continues, well synchronized across regions and broadening into investment. US growth remains decent, if unexciting, while Europe and Japan have shown further upside. China has likely peaked, but other EMs are catching up.

Inflation remains weak, despite declining unemployment, raising doubts about the Philips curve, and pointing to structural factors. Continuing expansion should further reduce slack and eventually help push prices, but not without stability risks.

Core central banks thus remain cautious, while seemingly determined to normalize policies gradually: having initiated its balance sheet run-off, some analysts expect the Fed to hike this December and twice in 2018. The ECB is likely to taper further in 2018 and may consider gradually lifting its negative rates later in 2018.

Politics again acted as the catalyst to sell euros. Last week was the German elections, and this week it is the escalating crisis in Catalonia. The German coalition government talks are expected to drag on for some time. The violence that attended the "symbolic" Catalan referendum and a potential declaration of independence in its wake has raised political tensions in Spain.

Over in the UK, embattled Theresa May came under additional fire as Tory party divisions over Brexit reopened. The cabinet infighting over the future UK-EU relationship is buoying EUR/GBP in the face of the euro correction.

EM Asia (ex-China) continues to benefit from the synchronized global expansion, with improving US Capex and the related tech cycle being good news for the regions’ exports – in particular, its small open economies (Korean, Taiwan, Malaysia, Thailand). Initially driven by a global revival of manufacturing, the recovery has since spilled over into labor markets, supporting domestic consumption and some areas of investment.