CIBC Capital Markets
May 20, 2026
FX Monthly: Just Another Couple Weeks
Monthly UpdateFXRates Govt BondsMacro Economic IndicatorsEnergyOther
The May FX Monthly highlights a short-term tactical bid for the USD driven by geopolitical risk premiums and energy shocks, with a structural weakening trend expected to emerge in H2 2026. Central bank divergence is growing as the energy crisis shifts inflation profiles, forcing some banks to accelerate hikes while others merely delay easing.
Key Takeaways
- 1.The USD is expected to see tactical strength in the short term due to risk-off sentiment but will resume a weakening trend in H2 2026.
- 2.Central bank policy divergence is intensifying, with those near neutral (ECB, BoC) pulling hikes forward, while those in easing cycles (Fed, BoE) delay cuts.
- 3.Japanese authorities are becoming more tolerant of a weaker JPY, with the 160 level 'red line' expected to become thinner as fundamentals shift.
Table of Contents
- Majors Summary
- FX Forecasts
- CAD Crosses
- EUR Crosses
- Central Bank Forecasts
- Market Pricing
- United States
- Canada
- Europe
- Asia-Pacific
- Emerging Markets
- Latin America
- South Africa
- Disclaimer
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Authors
Sarah YingNoah BuffamJeremy Stretch
Securities
DXYUSD/CADUSDJPY
Themes
Central Bank Policy DivergenceEnergy Shock / Geopolitical ConflictTrade Renegotiations (CUSMA/USMCA)
Regions
North AmericaEuropeAsia PacificUnited StatesCanadaJapan