PNC Currency Review, June 2022 - Prior Quarter March 2022 - May 2022
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PNC Currency Review, June 2022 Prior Quarter March 2022 – May 2022
Summary
DXY Major Currencies Dollar Index
The US dollar index reached a 20-year high in May.
2 year history : 1 year forecast
106
104
DXY US Dollar Index
102
100 +4.5%
98
96
94
92
90
88
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
USD surges as Fed rate
hike expectations increase The DXY dollar index appreciated 4.5% in the trailing quarter,
104 hitting a fresh twenty-year high in May. Expectations for
aggressive Fed interest-rate hikes and escalating geopolitical
DXY US Dollar Index
102
tensions all contributed to the dollar’s remarkable gain in the
trailing quarter.
The DXY dollar index tracks the value of the U.S. dollar relative
100
to a basket of six foreign currencies (the euro, Japanese yen,
British pound, Canadian dollar, Swedish krona and Swiss franc).
98
Currency Outlook
96 PNC forecasts for continued but slower appreciation in the short
Mar-22 Apr-22 May-22 term and a slight depreciation in the second half of 2022; the
consensus forecast expects a depreciation of the dollar.
Previous Quarter
If the Russia-Ukraine crisis drags on longer than expected, the
dollar will likely be stronger than forecasted.
Source: BloombergCurrency Update
Euro
The euro depreciated 3.4% in the trailing quarter amidst the Russia-Ukraine conflict.
1.25 2 year history : 1 year forecast
1.20
US dollars per euro
1.15
-3.4%
1.10
1.05
1.00
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
1.13
3 month history Previous Quarter Recap
The euro depreciated a net 3.4% in the trailing quarter. Increased
1.11 geopolitical tensions, energy security issues, and a cloudier
economic outlook weighed on the euro.
US dollars per euro
1.09 The euro reversed its downtrend in mid-May after the European
Central Bank (ECB) president, Christine Lagarde, stated that a
1.07 rate hike would come early in the third quarter of this year.
The ECB has not raised its policy rate in over ten years.
1.05
Currency Outlook
1.03 PNC expects the euro to appreciate further in the near term as the
Mar-22 Apr-22 May-22 ECB raises interest rates, followed by a depreciation over the
forecast horizon, while the consensus sees a modest recovery.
Previous Quarter
If the Russia-Ukraine crisis escalates or spills over Ukraine's
borders, the euro could be weaker than forecasted.
Source: BloombergCurrency Update
Great British Pound
The British pound is the third-worst performing major currency this year.
2 year history : 1 year forecast
1.45
US dollars per British pound
1.40
1.35
1.30 -5.3%
1.25
1.20
1.15
1.10
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.34
Pound sterling depreciated 5.3% on net in the trailing quarter.
1.32 Weak domestic economic fundamentals, a challenging domestic
US dollars per British pound
political environment, and increased external geopolitical risks
1.30 contributed to the pound’s weakness.
1.28 The British pound is the third-worst performing major currency
this year.
1.26 The pound falls as
markets price in Fed
1.24 rate hikes
Currency Outlook
1.22
PNC forecasts for the pound to continue to depreciate as the Fed
1.20
begins to normalize U.S. monetary policy; the consensus forecast
Mar-22 Apr-22 May-22 sees some appreciation.
Previous Quarter If the Russia-Ukraine crisis drags further or the Fed hikes more
aggressively than market expectations, the pound sterling would
likely be weaker than forecasted.
Source: BloombergCurrency Update
Canadian Dollar
The Canadian dollar appreciated 0.8% on net in the trailing quarter.
2 year history : 1 year forecast
1.40
Canadian dollars per US dollar
1.35
1.30 +0.8%
1.25
1.20
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.32 The Canadian dollar
falls as markets price in The Canadian dollar gained a scant 0.8% against the dollar in the
trailing quarter. The surge in energy prices in the trailing quarter
Canadian dollars per US dollar
further Fed tightening
1.30
contributed to the Canadian’s dollar slight appreciation. The
Canadian dollar and the U.S. dollar are the two best performing
major currencies this year.
1.28 Positive domestic economic data and increased expectations for
the Bank of Canada (BOC) to raise short-term interest rates
aggressively supported the Canadian dollar.
1.26
Currency Outlook
PNC expects the Canadian dollar to depreciate as commodity
1.24 prices stabilize in the second half of the year and the Fed hikes
Mar-22 Apr-22 May-22 aggressively; the consensus forecast anticipates modest
appreciation.
Previous Quarter
If the geopolitical crisis escalates, the Canadian dollar could be
stronger than expected.
Source: BloombergCurrency Update
Mexican Peso
The Mexican peso gained 4.7% in the trailing quarter.
2 year history : 1 year forecast
24
Mexican pesos per US dollar
22
+4.7%
20
18
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
21.4 The peso rallies as
The peso gained 4.7% in the trailing quarter, appreciating in May
to the strongest level since March 2020. The surge in global
Mexican pesos per US dollar
Mexico’s central bank
maintains an crude oil prices in the trailing quarter supported the peso.
21.0
aggressive stance
Positive domestic economic data and increased financial market
20.6 expectations for aggressive interest-rate hikes by the Bank of
Mexico contributed to the peso’s strength in the trailing quarter.
20.2
19.8
Currency Outlook
PNC forecasts for the peso to depreciate over the next few
19.4 quarters; the consensus forecast is for somewhat less
Mar-22 Apr-22 May-22 depreciation.
Previous Quarter PNC forecasts for the Federal Reserve to raise interest rates
aggressively in the next two years; this, as well as Mexico’s
domestic economic challenges, are downside risks to the peso.
Source: BloombergCurrency Update
Japanese Yen
The yen plummeted in the last quarter, reaching a 20-year low.
142 2 year history : 1 year forecast
Japanese yen per US dollar
137
132
127
122
-11.9%
117
112
107
102
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
131
The yen dropped 11.9% in the trailing quarter to its weakest level
128 in 20 years. Most of the depreciation was seen in April as
Japanese yen per US dollar
aggressive positioning from the Federal Reserve highlighted the
125
divergence in monetary policy between the Fed and the Bank of
Japan. The yen then recovered slightly in May.
122 Inflation in Japan is still close to zero, making the Bank of Japan
unlikely to taper its quantitative easing program in 2022 or 2023.
119 Yen falls as markets The divergence between U.S. and Japanese monetary policy
price in Fed rate hikes fueled the yen’s depreciation during the quarter.
116
Currency Outlook
113 PNC expects the yen to continue to depreciate in the coming
Mar-22 Apr-22 May-22 quarters, while the consensus anticipates slight appreciation.
Previous Quarter If the U.S. recovery proceeds faster or U.S. inflation stays high
for longer than forecasted, U.S. interest rates will likely surprise
to the upside and the yen be weaker than forecasted.
Source: BloombergCurrency Update
Chinese Renminbi
The renminbi fell sharply late in the last quarter as Covid lockdowns weighed on the Chinese economy.
2 year history : 1 year forecast
7.25
Chinese renminbi per US dollar
7.00
6.75
6.50
-5.7%
6.25
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
6.90
The renminbi traded steady throughout March before
Chinese renminbi per US dollar
6.80 Renminbi plummets as depreciating sharply in late April, falling 5.7% on net in the last
China’s covid lockdowns three months.
dampen growth
6.70 China’s “zero-Covid” policy has led to further lockdowns in the
country, which is negatively impacting China’s economic growth.
6.60
China’s central bank is taking a hands-off approach to the
6.50 depreciating currency, as a weaker renminbi can help offset
lower growth.
6.40
Currency Outlook
6.30 PNC forecasts for the renminbi to modestly depreciate over the
Mar-22 Apr-22 May-22 forecast horizon; the consensus anticipates little net change.
Previous Quarter The global economic recovery is an upside risk to the renminbi,
while the tightening of U.S. monetary policy and potential trade or
geopolitical tensions are downside risks.
Source: BloombergCurrency Update
Australian Dollar
The Australian dollar had a volatile quarter but depreciated just 0.9%.
2 year history : 1 year forecast
0.79
US dollars per Australian dollar
0.77
0.75
-0.9%
0.73
0.71
0.69
0.67
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
0.76
After appreciating to a ten-month high in early April, the
Australian dollar then fell sharply to a two-year low in early May,
US dollars per Australian dollar
then recovered in late May to finish the quarter down 0.9%.
0.74
The Australian dollar rose throughout March as surging
commodity prices supported the currency; the Australian dollar
0.72 then reversed course in April as slowing economic growth in
China weighed on currencies in the region.
0.70 Currency Outlook
Australian dollar falls as PNC and the consensus both anticipate the Australian dollar to
the USD surges appreciate over the forecast horizon.
0.68
Mar-22 Apr-22 May-22 If the Fed raises interest rates faster than markets anticipate, or
Australian-Sino relations worsen, the Australian dollar is likely to
Previous Quarter
be weaker than forecasted.
Source: BloombergCurrency Update
New Zealand Dollar
The New Zealand dollar depreciated 3.5% on net in the trailing quarter.
2 year history : 1 year forecast
0.75
US dollars per New Zealand dollar
0.70
-3.5%
0.65
0.60
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
0.70
After appreciating throughout March, the New Zealand dollar
US dollars per New Zealand dollar
then fell sharply to finish the quarter down 3.5%.
0.68
The New Zealand dollar rose throughout March as surging
commodity prices supported the currency; the New Zealand
dollar then reversed course in April as slowing economic growth
0.66 in China weighed on currencies in the region.
0.64 Currency Outlook
New Zealand dollar falls as
the USD surges
PNC and the consensus both anticipate the New Zealand dollar
to appreciate over the forecast horizon.
0.62
Mar-22 Apr-22 May-22 If China’s economic growth slows further, or the Fed raises
interest rates faster than markets anticipate, the New Zealand
Previous Quarter dollar is likely to be weaker than forecasted.
Source: BloombergCurrency Update
Indian Rupee
The Indian rupee depreciated 2.5% in the prior quarter amidst risk-off sentiment in the market.
2 year history : 1 year forecast
80
Indian Rupees per US Dollar
78
76
-2.5%
74
72
70
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
78.0
The rupee depreciated 2.5% on net in the trailing three months,
reaching its all-time low amidst broad risk-off sentiment in the
Indian Rupees per US Dollar
77.5
financial markets.
77.0 The cloudy economic outlook for China, India’s largest trading
partner, contributed to a weaker rupee in the past quarter.
76.5
High oil prices also pressured the rupee in the past quarter; India
76.0
is a net-importer of oil.
75.5 Currency Outlook
PNC and the consensus forecast both expect little net change in
75.0
the rupee in the coming quarters.
Mar-22 Apr-22 May-22
Previous Quarter
If Chinese economic data weakens, oil prices remain elevated, or
the Fed raises interest rates faster than markets anticipate, the
Indian rupee is likely to be weaker than forecasted.
Source: BloombergSwap Dealer Activities Standard Disclaimer The information contained herein (“Information”) was produced by an employee of PNC Bank, National Association’s (“PNC Bank”) foreign exchange and derivative products group. Such Information is not a “research report” nor is it intended to constitute a “research report” (as defined by applicable regulations). The Information is of general market, economic, and political conditions or statistical summaries of financial data and is not an analysis of the price or market for any product or transaction. This document and the Information it contains is intended for informational purposes only, and should not be construed as legal, accounting, tax, trading or other professional advice. You should consult with your own independent legal, accounting, tax and other professional advisors before taking any action based on this Information. Under no circumstances should this document or any Information contained herein be considered a recommendation or solicitation to buy or sell any products or services or a commitment to enter into any transaction. Eligibility for particular products or services is conditioned upon PNC Bank’s subsequent formal agreement, which will be subject to internal approvals and binding transaction documents. The Information contained herein on exchange and interest rates, commodity prices and market indices are gathered from sources PNC Bank believes to be reliable and accurate at the time of publication. Therefore, PNC Bank makes no representations or warranties regarding the Information’s accuracy, timeliness, or completeness. Further, all performance, returns, prices, or rates are for illustrative purposes only, are subject to firm quotes, may not be achievable or indicative of future performance, actual results will vary, and may be adversely affected by exchange rates, interest rates, commodity prices or other factors. Markets do and will change. Any Information, values, estimates, or opinions expressed or implied herein are subject to change without notice. Under no circumstances is PNC Bank liable for any lost profits, lost opportunities, or any indirect, consequential, incidental, special, punitive, or exemplary damages arising out of any use, reliance, or any opinion, estimate or Information contained herein or any omission therefrom. PNC Bank, its predecessors, and affiliated companies may serve, either currently or within the previous three years, as underwriter, placement agent, market maker, manager, initial purchaser, broker, or deal as principal in any security, derivative or other instruments mentioned in this document. Any such relationship may differ materially from transactions contemplated herein. In addition, PNC Bank, its affiliated companies, shareholders, directors, officers, or employees may at any time acquire, hold or dispose of positions similar or contrary to the positions contemplated herein (including hedging and trading positions) which may impact the performance of a product described in this document. Early termination of a foreign exchange or derivative transaction may require payment of a termination amount to or from PNC Bank depending on market rates or prices at the time of termination. The Information contained herein is confidential and may not be disclosed, duplicated, copied, disseminated or distributed by any means to any other person or entity without PNC Bank’s prior written consent. PNC is a registered service mark of The PNC Financial Services Group, Inc. (“PNC”). Foreign exchange and derivative products are obligations of PNC Bank, Member FDIC and a wholly owned subsidiary of PNC. Foreign exchange and derivative products are not bank deposits and are not FDIC insured, nor are they insured or guaranteed by PNC Bank or any of its subsidiaries or affiliates. ©2022 The PNC Financial Services Group, Inc. All rights reserved. Revision 01.02.2020
Market Update Disclosure The information contained herein (“Information”) was produced by an employee of PNC Bank, National Association’s (“PNC Bank”) foreign exchange and derivative products group. Such Information is not a “research report” nor is it intended to constitute a “research report” (as defined by applicable regulations). The Information is of general market, economic, and political conditions or statistical summaries of financial data and is not an analysis of the price or market for any product or transaction. This document and the Information it contains is intended for informational purposes only, and should not be construed as legal, accounting, tax, trading or other professional advice. You should consult with your own independent advisors before taking any action based on the Information. Under no circumstances should the Information be considered trading advice or a recommendation or solicitation to buy or sell any products or services or a commitment to enter into any transaction. The Information is gathered from sources PNC Bank believes to be reliable and accurate at the time of publication and are subject to change without notice. PNC Bank makes no representations or warranties regarding the Information’s accuracy, timeliness, or completeness. All performance, returns, prices or rates are for illustrative purposes only. Markets do and will change. Actual results will vary, and may be adversely affected by exchange rates, interest rates, commodity prices or other factors. PNC is a registered service mark of The PNC Financial Services Group, Inc. (“PNC”). Foreign exchange and derivative products are obligations of PNC Bank, Member FDIC and a wholly owned subsidiary of PNC. Foreign exchange and derivative products are not bank deposits and are not FDIC insured, nor are they insured or guaranteed by PNC Bank or any of its subsidiaries or affiliates. ©2022 The PNC Financial Services Group, Inc. All rights reserved. Revision 01.02.2020
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