FX Forecasts

The May 2026 FX outlook hinges on an expected Middle East peace deal that would ease energy prices and allow markets to refocus on divergent central bank policies. Monex expects short-term USD strength followed by a long-term decline, while favoring the EUR and remaining bearish on the GBP and CAD.

Key Takeaways

• 1.A Middle East peace framework is expected in May, which would reopen the Strait of Hormuz and shift market focus from risk headlines to economic fundamentals.
• 2.The US Dollar (DXY) is expected to see a short-term rise to 98.7 in May before a longer-term structural decline toward 96.0 over 12 months.
• 3.The ECB's hawkish signals are deemed more credible than those of the BoE or BoC, with a 50bps rate hike expected in June, supporting the EUR.

Table of Contents

• INTRODUCTION
• Middle East risks in focus through April
• May(be) seeing a resolution to the Middle East fighting
• Central banks shift hawkish
• FX VIEWS
• USD
• EUR
• GBP
• CAD
• JPY
• BRL
• HUF
• Forecasts

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