PNC Currency Review, March 2021 - Prior Quarter December 2020 - February 2021 - PNC Business Credit UK
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
PNC Currency Review, March 2021 Prior Quarter December 2020 – February 2021
Summary
DXY Major Currencies Dollar Index
The dollar depreciated in the December-to-February quarter as political and pandemic risks receded.
2 year history : 1 year forecast
104
102
DXY US Dollar Index
100
98
96
94
-1.1%
92
90
88
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
92
The dollar fell 1.1% in the December-to-February quarter as the
U.S. and global recovery from the 2020 recession proceeded.
DXY US Dollar Index
The dollar’s trough for the quarter was in early January. After that,
91 the dollar partially recovered as Democrats secured control of the
Senate, making additional fiscal stimulus likely, and as vaccine
distribution proceeded. These developments pushed U.S. long-
term interest rates higher and supported the dollar.
90
Currency Outlook
PNC forecasts for the dollar to be little changed over the forecast
horizon; the consensus forecast anticipates further depreciation.
89
Dec-20 Jan-21 Feb-21 If the U.S. passes more fiscal stimulus after the Biden plan and
the global economy recovers faster than expected, the dollar
Previous Quarter could be weaker than forecast. On the other hand, another major
global shock, either from the pandemic or an unrelated source,
could cause the dollar to be stronger than forecasted.
Source: BloombergCurrency Update
Euro
The euro was little changed in the trailing quarter as the ECB jawboned financial markets.
2 year history : 1 year forecast
1.26
1.22
US dollars per euro
+0.1%
1.18
1.14
1.10
1.06
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
1.24 Previous Quarter Recap
3 month history
The euro appreciated 0.1% in the December-to-February quarter
and touched the highest levels since the first half of 2018.
US dollars per euro
1.22 The euro depreciated modestly in the second half of the quarter as
European Central Bank policymakers warned that they could cut
policy interest rates or accelerate asset purchases if euro long-term
interest rates rise or the euro appreciates further.
1.20
Currency Outlook
PNC forecasts for the euro to peak vis-à-vis the dollar around mid-
2021 as base effects cause a near-term peak in U.S. inflation, then
1.18 for the euro to return to late-2020 levels by year-end 2021 as the
Dec-20 Jan-21 Feb-21 currency area’s persistently low growth, near-zero inflation, and
negative interest rates weigh on the euro, as they did before 2020.
Previous Quarter
If there is another major global shock, either from the pandemic or
an unrelated cause, the euro could be weaker than forecasted.
Source: BloombergCurrency Update
Great British Pound
Pound sterling appreciated in the December-to-February quarter as Brexit finally resolved.
2 year history : 1 year forecast
1.40
US dollars per British pound
1.35
+3.8%
1.30
1.25
1.20
1.15
1.10
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.41 Pound sterling appreciated 3.8% in the December-to-February
quarter to the strongest since the first half of 2018 as the UK and
US dollars per British pound
EU implemented a post-Brexit trade deal.
1.39
The UK government distributed vaccines faster than the EU in
1.37 early 2021, boosting prospects for the recovery of the UK’s
service sector. This supported UK real interest rates and fueled
pound sterling’s appreciation.
1.35
Currency Outlook
1.33
PNC forecasts a slightly weaker pound by the end of 2021 as
1.31 markets’ focus shifts to the U.K.’s weak medium-term growth
Dec-20 Jan-21 Feb-21 prospects; the consensus forecast is for little change.
Previous Quarter If there is another major global shock, either from the pandemic,
UK-EU relations, or another cause, pound sterling would likely be
weaker than forecasted.
Source: BloombergCurrency Update
Canadian Dollar
The Canadian dollar hit the highest in three years as oil demand and risk sentiment improved.
2 year history : 1 year forecast
1.49
Canadian dollars per US dollar
1.44
1.39
1.34
+1.5%
1.29
1.24
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.30
The Canadian dollar appreciated 1.5% in the December-to-
Canadian dollars per US dollar
February quarter, reaching the highest since the first half of 2018,
1.29 thanks to positive news about vaccines, rising crude oil prices,
and a broad-based increase in prices of risky financial assets.
1.28 The Canadian dollar is strongly correlated with the price of crude
oil; the price of a barrel of Western Canadian Select rose 50%
1.27 during the quarter.
Currency Outlook
1.26
Both PNC and the consensus forecast for the Canadian dollar to
1.25 hold mostly unchanged over the next year.
Dec-20 Jan-21 Feb-21
If coronavirus vaccine supplies surprise to the upside and
Previous Quarter vaccines become widely available globally, petroleum demand
rebounds, and OPEC+ agree to production cuts, the Canadian
dollar is likely to be stronger than forecasted.
Source: BloombergCurrency Update
Mexican Peso
The peso depreciated in the December-to-February quarter amid higher financial market volatility.
2 year history : 1 year forecast
26
Mexican pesos per US dollar
24
22
-3.9%
20
18
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
21.0
The Mexican peso depreciated 3.9% in the December-to-
February quarter and finished the quarter near its trailing two-
Mexican pesos per US dollar
20.7 year average.
The peso depreciated in the second half of the quarter as stock
20.4
market volatility increased and long-term interest rates rose in
advanced economies. These developments sapped demand for
20.1 riskier emerging market currencies including the peso.
Currency Outlook
19.8
Both PNC and the consensus forecast for the peso to be little
changed over the next few quarters.
19.5
Dec-20 Jan-21 Feb-21 However, PNC sees risks skewed toward renewed peso
depreciation. Mexico’s poor pandemic response, state-centric
Previous Quarter economic strategy, and unpredictable economic policies create
more downside risk than the upside risk from a recovering global
economy and buoyant financial conditions.
Source: BloombergCurrency Update
Japanese Yen
The Japanese yen depreciated in the December-to-February quarter as U.S. risk-free interest rates rose.
2 year history : 1 year forecast
114
Japanese yen per US dollar
112
110
108
-2.1%
106
104
102
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
107
The yen depreciated 2.1% in the December-to-February quarter.
Japanese yen per US dollar
106 The yen reached its high in the quarter on the day of the Georgia
run-off elections, then depreciated as U.S. interest rates rose on
105 expectations of additional fiscal stimulus.
The re-imposition of a state of emergency in Japan in the winter
104 months also weighed on the value of the yen.
103 Currency Outlook
Both PNC and the consensus expect for the yen to be little
102
changed in twelve months from its level at the end of February.
Dec-20 Jan-21 Feb-21
If there is another major global shock, either from the pandemic
Previous Quarter
or an unrelated cause, the yen would likely be stronger than
forecasted.
Source: BloombergCurrency Update
Chinese Renminbi
The renminbi appreciated as China’s economy continued to recover from the 2020 recession.
2 year history : 1 year forecast
Chinese renminbi per US dollar
7.1
6.9
6.7
+1.6%
6.5
6.3
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
6.6
The renminbi appreciated 1.6% in the December-to-February
Chinese renminbi per US dollar
quarter as China’s economy continued to recover from the
recession and global financial conditions improved.
The renminbi touched its strongest level since mid-2018 in late
January in anticipation of more predictable U.S. trade policies
6.5 after the Presidential transition and a global economic recovery
that benefits China and other emerging markets.
Currency Outlook
6.4 PNC forecasts for the renminbi to depreciate modestly in 2021,
Dec-20 Jan-21 Feb-21 while the consensus forecast anticipates further yuan
appreciation.
Previous Quarter
The global economic recovery is an upside risk to the yuan, while
potential trade or geopolitical tensions are downside risks.
Source: BloombergCurrency Update
Australian Dollar
The Australian dollar touched the highest level in three years thanks to recovering commodity prices.
2 year history : 1 year forecast
0.80
US dollars per Australian dollar
0.75
+4.5%
0.70
0.65
0.60
0.55
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
0.80
The Australian dollar appreciated 4.5% in the December-to-
US dollars per Australian dollar
February quarter to the highest level in three years.
0.78 The Australian dollar’s peak in the trailing quarter was February
24. Rising commodity prices, improving domestic economic
indicators and the strong Chinese economic recovery all
0.76 supported the Australian dollar in the trailing quarter.
Currency Outlook
0.74
Both PNC and the consensus forecast anticipate little net change
for the Australian dollar over the next few quarters.
0.72
Dec-20 Jan-21 Feb-21
If the pandemic again worsens, Australia’s economic fundamentals
deteriorate, the RBA increases its quantitative easing program, or
Previous Quarter the global economy re-enters a recession, the Australian dollar
would likely be weaker than forecasted.
Source: BloombergCurrency Update
New Zealand Dollar
The New Zealand dollar appreciated to the strongest level since 2017 in the trailing quarter.
2 year history : 1 year forecast
0.75
US dollars per New Zealand dollar
0.70
+2.4%
0.65
0.60
0.55
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
0.75
US dollars per New Zealand dollar
The New Zealand dollar appreciated 2.4% in the December-to-
0.74 February quarter and reached the strongest level since mid-2017.
The New Zealand dollar typically tracks closely with global growth
0.73 expectations, which improved in the quarter as vaccine distribution
began. Improving domestic economic indicators and stronger
commodity prices also supported the New Zealand dollar.
0.72
Currency Outlook
0.71
PNC and the consensus forecast both anticipate for the New
Zealand dollar to be mostly unchanged over the next few quarters.
0.70
Dec-20 Jan-21 Feb-21 If the pandemic persists, vaccines take longer than expected to
Previous Quarter
distribute, vaccination rates are lower than expected, commodities
prices move lower, or the global economy re-enters a recession,
the New Zealand dollar 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. ©2021 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. ©2021 The PNC Financial Services Group, Inc. All rights reserved. Revision 01.02.2020
You can also read
