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2019 Forex Forecast from NordFX

NordFX: 2019 is Year of Falling Dollar

As usual, Deutsche Bank experts summed up the year at the end of December. And the results were just fantastic, with a negative connotation. 93% of all assets fell in comparison with January 2018, and this figure was the worst in the last 118 years, surpassing even 1920 with its 84%.

But what is ahead for the financial markets in 2019?

 

According to NordFX broker leading analyst John Gordon, everything that happened in the outgoing year is only the beginning of a common prolonged depression. First of all, the forecast concerns the United States.

 

The situation in the Eurozone, says John Gordon, looks somewhat better, despite the fact that the ECB has revised its forecasts for inflation and economic growth downward. The past year has shown that the trade wars unleashed by Trump are not so terrible for the Old World as was previously assumed. However, both the European currency and the British pound continue to be influenced by the problems associated with Brexit.

On the other hand, the end of the 90-day truce between the United States and China will soon come up, which introduces additional uncertainty about the dollar exchange rate.

 

Blomberg bases its forecast on the positive dynamics of European exports and accelerated growth of average wages. All this may lead to the normalization of the monetary policy of the Eurozone and the growth of the euro to the level of$1.20 by the end of the year.

Morgan Stanley recommends the sale of the dollar against the euro amid the forecast for inflation in the Eurozone. The immediate target for the EUR/USD pair is in the $1.18 zone.

 

It should be noted that, for the most part, analysts make very optimistic forecasts for the euro for the next 3-month period. Societe Generale and CIBC Capital Markets point out at the level $1.17, TD Securities forecast is at $1.18, Unicredit at $1.19, and finally, Lloyds Bank has set a record bar of $1.24.

 

However, there are more cautious views. Thus, Citi experts believe that the European currency has not yet reached its bottom, and by the end of the I quarter of 2019. it may drop to $1.13, and only then it will go up, reaching the mark at $1.18 in the second half of the year. The Barclays Capital expect a fall to $1.12 by March 31, and for ING Group forecasts, the bottom may be at the level of $1.11.

 

JPMorgan Chase analysts also believe that the US economy will experience a recession in 2019, as Trump’s fiscal stimulus will run out, and the Fed’s monetary policy will no longer provide cheap money. Thus, the growth rate of the Eurozone economy will come out ahead, and the euro will start to grow on expectations of higher interest rates from the ECB, but this will happen only in the second half of 2019.

In numbers, the forecast looks like this: falling to $1.11 in the first quarter and rising to $1.18 by the end of the fourth quarter of 2019.

 

As for the GBP/USD, continues the NordFX analyst, here all depends on which scenario Brexit will follow. For example, the JPMorgan Chase forecast assumes the growth of the British currency to $1.30 in the first quarter and to $1.37 by the end of the year, provided that Brexit is quiet(40% probability). In the absence of an Agreement on the terms of leaving the EU, the pound sterling will fall by 10%, and in the case of Brexit cancellation, on the contrary, it will grow by 10%.

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