May 2024 Monthly Report

Read the Ballinger Monthly FX Report for May below.

Expectations for rate cuts across the G10 had been glued to the Fed’s trajectory though Q1 but, while its peers continue to gear up for summer rate cuts, US disinflation has now conclusively hit a brick wall. Markets rapidly absorbed the notion of ‘divergence’ last month, as they arrived at the conclusion that the Fed would cut significantly later in the year, if at all.

The result was a ramp up in FX volatility and some decisive breakouts to the downside for much of the G10 against a rallying dollar. Discontent at its strength amongst officials in Asia prompted some fierce responses – most notably Japan – and some new debates surfaced in the chaos. Might the Fed’s next move be a hike, rather than a cut? And with diverging European and US rates, could the euro fall back to parity? Investors will spend this month looking for clues on the answers.