Next Week’s FX Forecast & Events Apr 06, 2020

High volatility will persist

Volatility levels in currency markets will remain high in the short term. European and Canadian markets will also be on holiday on Friday which will cut trading volumes and maintain the risk of erratic moves. 

Coronavirus impact will continue to dominate

Global coronavirus developments will remain extremely important for market sentiment as the economic damage continues to increase. 

There has been heavy damage from lockdowns in most major economies. Developments in Italy and Spain will be watched very closely in the short term with some tentative evidence that the death rates are at a peak. Any decline in deaths and new cases would offer some hope of a path through the short-term crisis towards a gradual relaxation of controls and limited resumption in economic activity.

Such a development would help support risk appetite. In contrast, a further surge in deaths would be a big blow to confidence. There will also be a further increase in US fatalities in the short term.

Central banks out of ammunition on interest rates 

Rhetoric from central banks will be watched closely and there will be further buying of bonds to help cap upward pressure on bond yields. Overall, however, there is only very limited actions that can be taken on interest rates with short-term rates cut to near zero across all major countries. 

OPEC in focus

Oil prices will be a significant focus during the week with the potential for OPEC to hold an emergency meeting in an attempt to support prices through a fresh round of production cuts.

The meeting now appears to have been delayed until April 9th due to further tensions between Saudi Arabia and Russia and oil prices remained volatile.  

US

The latest jobless claims data on Thursday will again be the most important release during the week after the huge increase in claims seen over the past two weeks. Consensus forecasts are for an increase of close to 5.0 million on the week after the 6.65 million increase last week.

Any further surge in claims will also have an important impact on US economic and political dynamics.

The latest consumer confidence reading is due on Thursday with a sharp decline likely. Other data releases are likely to have only limited impact.

UK

The UK will release data on GDP and industrial production, but little impact is likely to given that the data is for February. Markets will mainly focus on daily coronavirus data. 

Sterling will tend to be correlated with developments in the global economy with Sterling more vulnerable if fears intensify.

Euro-zone

The latest Euro-zone data is likely to have only limited impact.  The ability of Euro-zone countries to co-operate on fiscal policy will, however, be an important element during the week.

International

The Reserve Bank of Australia will hold its latest policy meeting on Tuesday. No changes in interest rates are likely as they are already at record lows. There could be changes to the bond-purchase programme. 

The Bank of Canada will release its business outlook survey on Monday with the employment data on Thursday. The data will give some insight into the depth of recession faded by the Canadian economy from coronavirus and the additional damage from very low oil prices. Market expectations are for an employment decline of around 350,000 for the month with unemployment at 7.0% from 5.6%.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.082 1.080 1.120
USD/JPY 108.4 108.9 105.0
EUR/GBP 0.884 0.890 0.879
GBP/EUR 1.131 1.124 1.138
GBP/USD 1.223 1.213 1.274
AUD/USD 0.601 0.600 0.625
USD/CAD 1.422 1.430 1.400
USD/SGD 1.440 1.447 1.420
USD/HKD 7.752 7.760 7.770
NZD/USD 0.602 0.595 0.620
GBP/JPY 132.6 132.1 133.8
GBP/AUD 2.036 2.022 2.039
GBP/NZD 2.032 2.039 2.059
GBP/SGD 1.761 1.756 1.809
GBP/HKD 9.484 9.417 9.900
GBP/CHF 1.196 1.193 1.215

Tim Clayton

Tim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including Investing.com and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics.

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