Hard Brexit should trigger stronger dollar

Given the political developments in the UK in recent weeks, we no longer expect a negotiated withdrawal from the EU. With the expectation of hard Brexit as of October 31, our outlook for the EURUSD changes, at least for the coming months. In an environment that will be characterized by high uncertainty, we expect the dollar to strengthen, but this should be relatively moderate, as the dollar is already highly valued. Starting from these lows, the euro should strengthen towards the end of the year. The movement should, however, be slow, as it will take time for the markets and the Eurozone economy to come to terms with the effects of hard Brexit.

EUR/JPY: Yen stays firm

The escalation in the global trade conflict has led to a further strengthening of the yen against the euro. At its meeting at the end of April, the Japanese central bank announced further easing measures should the momentum of inflation ease. Japan's average inflation over the past two years has been around +0.8%, well below that of the Eurozone (+1.6%). From a fundamental point of view, this has favored pressure to firm the yen. The consensus on Bloomberg expects the euro to weaken somewhat against the yen, to 124 in 2Q19.

EUR/CHF: escalating trade war supports CHF

Persistently weak leading indicators and the intensification of the trade dispute between the US and China have recently favored a strengthening of the Swiss franc against the euro. In addition, we now expect hard Brexit at the end of October due to recent political developments in the United Kingdom. As a result, pressure to firm the Swiss franc should increase in 4Q19. We therefore expect the EURCHF exchange rate to reach the level of around 1.10 at the end of 3Q19. It remains to be seen how the SNB will react to the recent rise in global tensions at its forthcoming meeting (June 13). Should further geopolitical crises escalate acutely (trade dispute, Iran), the Swiss franc could, as recently happened, quickly strengthen against the euro at any time.

Download The Full Article

This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD stabilizing as US coronavirus cases continue to climb

EUR/USD is trading around 1.1250, pressured amid concerns about the spread of coronavirus in the US. Traders are digesting the upbeat Non-Farm Payrolls figures already out ahead of the long US weekend. 

EUR/USD News

GBP/USD attempting a bounce amid thin liquidity

GBP/USD is closer to 1.25, off the lows. Top-level EU-UK Brexit talks have been postponed until next week amid disagreements. The UK is continuing to reopen while US coronavirus cases are surging. 

GBP/USD News

Bitcoin must endorse the time of Ethereum has come

The crypto market remains in a choke point, and after signs of a possible upward shift yesterday, the market was once again disappointed to see Bitcoin in the low range of the $8900 to $9000 choke point.

Read more

Gold: There is a bearish signal on the 4-hour chart

Price action has been slow on Friday due to the bank holiday in the US as the nation celebrates independence day. This week has been an interesting one as there has been some good economic data but some very bad coronavirus news in the US. 

Gold News

S&P 500: Futures struggle to refresh two-week top

S&P 500 Futures prints mild loss of 0.10% while declining to 3,126 during the initial hour of Tokyo session on Friday. In doing so, the risk barometer fails to extend the previous four-day winning streak.

Read more

Forex Majors

Cryptocurrencies

Signatures