While the year began with the market expecting 6-7 interest rate cuts this year from the ECB and the Fed, so far there has only been one interest rate cut by the ECB. As the Fed has not yet made any cuts at all to date this has provided a tailwind for the USD.


The ending of negative interest rates by the Bank of Japan (BoJ) in March did not give the JPY any tailwind. On the contrary: The JPY came under pressure again after the interest rate decision and fell to a 30-year low against the EUR and to its lowest level against the USD since 1986.


Shortly before the end of H1, the GBP actually overtook the USD as the strongest G10 currency in 2024. This is mainly due to upward revisions in expectations for growth, wages and inflation.


In this CIO Viewpoint FX – Low G10 currency volatility - to date – we discuss which central banks are likely to cut interest rates next, what potential impact this could have on currency pair volatility, and the outlook for the next twelve months.



Key takeaways:

  • In Q1, not only did expectations for the monetary policy of the Fed and the ECB develop almost in sync, but the data on economic growth converged due to the moderate increase in Eurozone GDP. By the end of June 2025, we expect the Fed and the ECB to deliver three rate cuts each.
  • Even after negative interest rates were lifted the BoJ remains accommodative. The JPY did not benefit in the slightest from the monetary policy turnaround – on the contrary. Only an unexpectedly sharp decline in U.S. yields may lead to a stronger appreciation.
  • Potential further monetary loosening by the PBoC as well as the U.S. election in November could put further pressure on the CNY.



The CIO Viewpoint below is available to download. Please refer to the Important Information at the end of the memo for disclosures and risk warnings.



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