There is Still Little FX Movement in Autumn
Currency movements have virtually come to a standstill over the past month. The USD has fluctuated by less than 3%, and the CHF, SEK, AUD and CAD have also remained virtually unchanged.
As expected, the pound continued to decline, losing just under 2% against all major currencies.
In terms of currency, the year is essentially finished. I see little chance of significant change.
Looking ahead to the coming year, I expect ‘more of the same’ in the first half of 2026.
Typically, the primary drivers of change in the foreign exchange structure become apparent well in advance. Currently, there is nothing to justify major shifts.
The geopolitical situation is also calming down, at least for the time being, with China and the US now engaged in a process of rapprochement and no longer trading insults.
When it comes to valuation levels, the stock markets are on the ropes. Despite solid growth figures, central banks and governments are continuing to borrow and cut interest rates as if we were in a recession. Liquidity is therefore not expected to ease off in the coming year.
Another supportive factor is that central banks are ending their balance sheet reduction. Quantitative tightening will soon be a thing of the past. One might have assumed that this would put pressure on global liquidity. Recession prophets ultimately cited this as evidence. However, despite QT, the global M2 money supply actually increased by USD 10 trillion last year — almost exactly the same amount by which the value of gold increased over the same period. This was due to fiscal expansion and credit growth, which further fuelled the stock market boom.
And so the wheel of speculation will continue to turn in the coming year without any real progress being made. However, a crash will also be avoided!
Further Debt Packages in 2026 and Falling Interest Rates Lead to Further Growth
A lack of real progress means that not much will change. When change does come, it will originate from the USA.
The BBB tax reform will temporarily reduce the tax burden and boost consumption, which will contribute to inflation and encourage investment by companies and the government. However, the main risk is that long-term interest rates will rise so sharply that the housing sector, in particular, will be in real trouble.
The potential for problems is exacerbated by the fact that the US is awaiting an important court ruling which may invalidate the tariffs. This would undoubtedly push up long-term interest rates in the US and weaken the USD further, shaking the foundations of its supremacy even more. This would also have knock-on effects for major currencies.
The SEK, EUR and JPY would benefit the most, followed by the AUD, CAD and GBP, which will remain the weakest proportionally. The expected development of the CHF is atypical: the anticipated weakness of the USD could drag the CHF down against other major currencies, otherwise the SNB would have to justify an appreciation against all of them. I do not rule out the CHF depreciating briefly towards parity.
