LIVE MARKETS-Watch relative growth rates for big currency pairs in 2026

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WATCH RELATIVE GROWTH RATES FOR BIG CURRENCY PAIRS IN 2026

The trajectories for both euro/dollar and dollar/yen, the two most traded currency pairs in the world, look like they could depend on relative growth rates at the start of the year, according to Kit Juckes, Societe Generale's chief FX analyst.

Juckes, still churning out notes between Christmas and New Year, points out that while relative interest rate moves normally explain what happens in currencies, that correlation has completely broken down in the case of dollar/yen.

That has meant, in his words, "the market is left scrabbling around to find a justification for what is happening."

"The chosen explanation for now is Japanese fiscal sustainability," he says, adding that seems to suggest dollar/yen is now more about growth expectations than monetary policy.

"That is simply another way of saying that what the yen needs—above all else—is stronger GDP growth."

The situation for euro/dollar is slightly different.

There, Juckes notes, the correlation between the currencies and relative interest rate moves remains, and rates have been supporting the euro.

The problem is that moves in growth forecasts don't support the rate moves.

For Juckes, the simplest and biggest FX question for 2026 is "for how long can the rate/growth divergence persist, and how will convergence play out?"

(Alun John)

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