Currency Outlook

AUGUST 2019 – IN BRIEF

What happened

  • Global economic uncertainty and downward markets lifted the U.S. Dollar by 1.3%
  • The Federal Reserve felt it necessary to cut the interest by 25 basis points to bolster activity
  • President Donald Trump promised a 10.0% added tariff to the remaining imports from China
  • The Pound sank 3.8% as the dramatic march towards leaving the European Union continues
  • The Chinese Yuan was allowed to devalue to its weakest level in over a decade
  • The move brings currency manipulation into the equation and demonstrates that trade war will be a long-term issue with consequences

Tempus’ view

  • A loosening cycle may begin as the global outlook looks bleak in the midst of turmoil
  • Euro and other major currencies are likely to pick up steam as focus on trade war grows
  • MSCI Emerging Market currencies will depreciate as the cheaper CNY drags them
  • Pressure will continue to build on the Fed to cut in September further lowering the buck
  • We foresee tumultuous times and plenty of swings as markets readjust to the more convoluted environment that now faces currency intervention

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