PNC Currency Review, May 2021 - Prior Quarter February 2021 - April 2021
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PNC Currency Review, May 2021 Prior Quarter February 2021 – April 2021
Summary
DXY Major Currencies Dollar Index
The dollar was little changed in the February-to-April quarter as the economic recovery proceeded.
2 year history : 1 year forecast
104
102
DXY US Dollar Index
100
98
96
94 +0.1%
92
90
88
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
94
The DXY dollar index edged up 0.1% in the February-to-April
quarter. It appreciated 2.5%% in February and March as US
93 vaccinations outpaced those in most foreign developed countries.
DXY US Dollar Index
The dollar gave back most of those gains in April as foreign
92
vaccination campaigns ramped up. The dollar’s retreat in April
also reflected financial markets “buying the rumor and selling the
91 fact” of the U.S. infrastructure plan announced in late March.
Currency Outlook
90
PNC and the consensus forecast anticipate smaller net changes
in the dollar in 2021 and 2022 than in 2020.
89
Feb-21 Mar-21 Apr-21 If the U.S. passes more fiscal stimulus and the global economy
recovers faster than expected, the dollar could be weaker than
Previous Quarter 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 changed little on net in the February-to-April quarter despite the ECB increasing QE.
2 year history : 1 year forecast
1.25
-0.2%
US dollars per euro
1.20
1.15
1.10
1.05
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
1.24 Previous Quarter Recap
3 month history
The euro edged down 0.2% in the February-to-April quarter.
1.22 It touched the highest levels since the first half of 2018 in January,
US dollars per euro
then depreciated through the end of March as the European
Central Bank increased asset purchases (quantitative easing)
1.20 while vaccination in the U.S. outpaced the EU. The euro then
recovered in April as the EU vaccination program accelerated.
1.18 Currency Outlook
PNC forecasts for the euro to continue to fluctuate in 2021 but to
1.16
stay within its recent range; the consensus forecast likewise
Feb-21 Mar-21 Apr-21 anticipates little trend change in 2021 or 2022.
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 February-to-April quarter as the UK distributed vaccines.
2 year history : 1 year forecast
US dollars per British pound
1.40
1.35
+1.1%
1.30
1.25
1.20
1.15
1.10
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.42
Pound sterling appreciated 1.1% in the February-to-April quarter
and reached the strongest since the first half of 2018 as the UK’s
US dollars per British pound
economic recovery regained steam.
1.40 The UK inoculated half of its adult population by mid-March,
boosting prospects for the recovery of the UK’s service sector.
This supported British real interest rates and added impetus for
pound sterling’s appreciation.
1.38
Currency Outlook
PNC forecasts a weaker pound by the end of 2021 as markets’
1.36 focus shifts from the immediate recovery to the U.K.’s medium-term
Feb-21 Mar-21 Apr-21 growth prospects; the consensus forecasts modest further gains.
Previous Quarter If there is another major global shock, either from the pandemic,
ongoing UK-EU economic frictions, or another cause, pound
sterling would likely be weaker than forecasted.
Source: BloombergCurrency Update
Canadian Dollar
The Canadian dollar appreciated in the February-to-April quarter thanks to rising crude oil prices.
2 year history : 1 year forecast
1.50
Canadian dollars per US dollar
1.45
1.40
1.35
1.30
+3.9%
1.25
1.20
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.29
The Canadian dollar appreciated 3.9% in the February-to-April
Canadian dollars per US dollar
1.28 quarter, reaching the strongest level since 2018, thanks to a
faster than expected economic recovery, rising crude oil prices,
1.27 the Bank of Canada’s tapering its quantitative easing program,
and an improved outlook for the Canadian economy.
1.26
The Canadian dollar appreciated 2.6% from when the Bank of
1.25 Canada announced that they would taper their QE program on
April 21 and the end of April.
1.24
Currency Outlook
1.23
PNC expects the Canadian dollar to lose some momentum over
1.22 the forecast horizon as flexible oil producers raise output in
Feb-21 Mar-21 Apr-21 response to higher oil prices. The consensus forecast calls for the
Canadian dollar to hold mostly unchanged over the next year.
Previous Quarter
If the BOC tapers quicker than financial markets anticipate, the
Canadian dollar is likely to be stronger than forecasted.
Source: BloombergCurrency Update
Mexican Peso
The peso depreciated in the February-to-April quarter of 2021 as the global recovery advanced.
2 year history : 1 year forecast
26
Mexican pesos per US dollar
24
22
20
-0.5%
18
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
21.5
The Mexican peso depreciated 0.5% in the February-to-April
quarter of 2021.
Mexican pesos per US dollar
21.0 The peso depreciated through early March as long-term interest
rates rose in advanced economies and financial markets were
generally more volatile than earlier in the recovery. These drivers
20.5 of peso weakness faded into April, and the peso recovered to
finish the quarter only modestly weaker.
20.0 Currency Outlook
PNC forecasts for the peso to continue to depreciate over the
next few quarters while the consensus forecast is for the peso to
19.5 be little changed.
Feb-21 Mar-21 Apr-21
PNC forecasts for the Federal Reserve to begin tapering its
Previous Quarter quantitative easing program in early 2022; this, as well as
Mexico’s domestic economic challenges, are downside risks to
the peso.
Source: BloombergCurrency Update
Japanese Yen
The yen depreciated in the February-to-April quarter as U.S. long-term risk-free interest rates rose.
2 year history : 1 year forecast
114
Japanese yen per US dollar
112
110
108
-4.1%
106
104
102
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
112
The yen depreciated 4.1% in the February-to-April quarter of
2021. It reached its high for the year on the day of the Georgia
Japanese yen per US dollar
110
run-off elections, then depreciated sharply as U.S. fiscal stimulus
and faster vaccine distribution pushed U.S. long-term interest
rates higher. Japan’s re-imposition of a state of emergency in the
winter months also weighed on the value of the yen.
108
The yen recovered from some of these losses in April as the rise
in U.S. interest rates slowed.
106
Currency Outlook
PNC and the consensus forecast both expect for the yen to
104
Feb-21 Mar-21 Apr-21
reverse some of its recent depreciation in coming quarters.
Previous Quarter
If there is another major global shock, either from the pandemic
or an unrelated cause, the yen is likely to be stronger than
forecasted.
Source: BloombergCurrency Update
Chinese Renminbi
The renminbi was little changed in the February-to-April quarter as the global recovery proceeded.
2 year history : 1 year forecast
7.25
Chinese renminbi per US dollar
7.00
6.75
-0.2%
6.50
6.25
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
6.60
The renminbi edged down 0.2% in the February-to-April quarter
Chinese renminbi per US dollar
of 2021 as both the Chinese and global economies continued to
6.55 recover from the recession.
The renminbi touched its strongest level since mid-2018 in
February in anticipation of more predictable U.S.-China trade
6.50 relations, then depreciated through quarter end as U.S. long-
term interest rates rose and a Chinese banking regulator voiced
concerns about stock valuations, sending Chinese indices lower.
6.45
Currency Outlook
6.40 PNC forecasts for the renminbi to depreciate modestly in 2021,
Feb-21 Mar-21 Apr-21 while the consensus forecast anticipates little change.
Previous Quarter The global economic recovery is an upside risk to the renminbi,
while the eventual tightening of U.S. monetary policy and potential
trade or geopolitical tensions are downside risks.
Source: BloombergCurrency Update
Australian Dollar
The Australian dollar strengthened in the trailing quarter thanks to rising commodity prices.
2 year history : 1 year forecast
0.80
US dollars per Australian dollar
0.75
+1.4%
0.70
0.65
0.60
0.55
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
0.80
The Australian dollar touched 79 Aussie cents per U.S. dollar in
US dollars per Australian dollar
the February-to-April quarter, the strongest level since 2018, and
0.79 gained 1.4% on net in the quarter.
The Australian dollar reached its intra-quarter high on February
0.78
24, supported by rising commodity prices and the solid Chinese
economic recovery. After that, the Australian dollar lost some
0.77 steam as Chinese officials signaled they would slow credit growth.
Currency Outlook
0.76
PNC anticipates little net change for the Australian dollar over the
next few quarters while the consensus forecast expects a slight
0.75
gain in the Australian dollar.
Feb-21 Mar-21 Apr-21
Previous Quarter
If Australia’s economic fundamentals deteriorate in the near term or
Australia-China relations become more strained, the Australian
dollar would likely be weaker than forecasted.
Source: BloombergCurrency Update
New Zealand Dollar
The NZ dollar dipped as higher commodity prices were more than offset by higher U.S. treasury yields.
2 year history : 1 year forecast
0.75
US dollars per New Zealand dollar
0.70
-0.4%
0.65
0.60
0.55
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
0.75
The New Zealand dollar dipped 0.4% in the February-to-April
US dollars per New Zealand dollar
0.74 quarter after reaching the strongest level since 2017 in February.
The New Zealand dollar was supported by rising commodity prices,
0.73 and an overall improvement in risk sentiment in the trailing quarter;
but these tailwinds were more than offset by rising U.S. Treasury
0.72 yields, and the New Zealand government announcing they would
phase out tax incentives for homebuyers.
0.71
Currency Outlook
0.70 PNC forecasts a slight depreciation of the New Zealand dollar over
the next few quarters, while the consensus forecast anticipates a
0.69 slight appreciation.
Feb-21 Mar-21 Apr-21
If the pandemic persists, vaccines take longer than expected to
Previous Quarter distribute, commodity prices move lower, or New Zealand’s central
bank uses regulatory tools to cool the housing market, the New
Zealand dollar is likely to be weaker than forecasted.
Source: BloombergCurrency Update
Indian Rupee
The Indian rupee depreciated in the quarter as the domestic economic outlook became more uncertain.
2 year history : 1 year forecast
78
Indian Rupees per US Dollar
76
-1.5%
74
72
70
68
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
76.0
The Indian rupee depreciated 1.5% in the February-to-April
75.5 quarter. In late February, the rupee reached the strongest level
Indian Rupees per US Dollar
since the pandemic began as the Indian and global economies
75.0
recovered.
74.5
The rupee then depreciated sharply in March and April as the
74.0 pandemic worsened in India, the domestic economic outlook
weakened, oil prices rose, and the Reserve Bank of India
73.5
launched a new quantitative easing program.
73.0
Currency Outlook
72.5
PNC and the consensus forecast both anticipate for the Indian
72.0 rupee to recover somewhat over the next few quarters.
Feb-21 Mar-21 Apr-21
If the pandemic persists, vaccines take longer than expected to
Previous Quarter distribute, domestic economic data disappoint, oil prices rise
further, or the global economy re-enters a recession, 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. ©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
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