Executive summary

The USD index plunged to 13-month lows as investors speculated about Federal Reserve interest rate cuts. The US presidential election and central bank moves ahead of September are expected to cause further volatility.

Global equity benchmarks are near their highs, with speculators being bullish on the euro, pound, and yen compared to the dollar. The Federal Reserve has signaled willingness to ease interest rates, while China remains pessimistic due to net foreign capital outflows since 2019.

Global FX Outlook for September 2024

By Ingmar Apinis

August was tumultuous month for FX markets, with the USD index plunging to 13-month lows on speculation that the Federal Reserve will soon cut interest rates. A dramatic sell-off in the USD/JPY pair, down 11% from July highs, also sent ripples across global currency markets.

With heightened expectations for further central bank moves in September – and the US presidential election looming – risks are growing for more volatility as we near the end of 2024

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Key market themes to watch

Investors seem to have all but forgotten August’s volatility shock, and global equity benchmarks are approaching their previous highs as capital continues to flow out of the USD.

  • The dollar is losing its crown: For the first time since the beginning of 2021 FX speculators are simultaneously bullish on the euro, pound, and yen versus the US dollar.
  • Betting on lower policy rates: The Federal Reserve signaled its willingness to consider easing interest rates at its last meeting, which Jerome Powell confirmed at the Jackson Hole Symposium. September looks likely for a rate cut, but what happens afterwards remains uncertain.
  • Continued China pessimism: 2019 was the last year in which Chinese equities experienced a net inflow of foreign capital. Japan’s Topix has outperformed China’s Shanghai Composite by the most since around 2007.

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