Next Week’s FX Forecast & Events Apr 20, 2020

Volatility liable to ease slightly

Overall volatility in major currencies is likely to remain slightly lower as massive liquidity injections by central banks continue to soothe markets. 

Coronavirus exit strategies in focus

Global coronavirus exit strategies will increasingly be in focus as countries, especially in Europe attempt to shift towards a very gradual relaxation of restrictions.

Countries which tend to lag behind will tend to be punished by currency markets and there will also be a fresh injection of fear if the number of new deaths in a significant number of countries increases once again.  

Economic data will remain extremely weak, but markets will be looking to focus on the potential for a recovery later in the year.

Political unity important 

Markets will be starting to look at the longer-term implications and potential trends in the relative outlook. In this context, the degree of political cohesion will be important. A broadly unified stance would tend to support sentiment while divisions would erode the recovery potential. In particular, markets will be monitoring tensions between US President Trump and state Governors.

The longer-term budget costs will also have a growing impact on sentiment given the huge upward pressure on budgets.

US

Jobless claims will inevitably be an important release once again with some boost to sentiment if the number registers another weekly decline. Markets will also be attempting to monitor real-time indicators such as store sales.

UK

The latest flash readings for the PMI business confidence data will be released on Thursday with further weakness inevitable, especially in the services sector.

The data will inevitably register a further sharp deterioration for April, especially in the services sector. The relative performance compared with the Euro-zone and US will be important for Sterling sentiment.

The latest CPI inflation data is due on Wednesday and retail sales data on Friday. Labour-market data is due for release on Tuesday. The unemployment data will be out of date, although jobless claims should show an impact from the coronavirus outbreak. 

Euro-zone

The Euro-zone PMI business confidence data will also be released on Thursday with a further sharp downturn expected in the data. The German IFO data is due on Friday and the ZEW investor confidence release is scheduled for Tuesday.

The Eurogroup of countries will hold a virtual meeting on Thursday and will attempt to work out details of the emergency support package.

Divisions would tend to weaken the Euro while agreement to issue coronabonds would be likely to boost the single currency to some extent.

International

The Canadian inflation data is due on Wednesday with the slide in oil prices likely to push the headline rate lower. Changes in oil prices will continue to have a significant impact on the Canadian dollar.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.087 1.088 1.110
USD/JPY 107.5 108.0 106.0
EUR/GBP 0.870 0.877 0.872
GBP/EUR 1.149 1.140 1.147
GBP/USD 1.249 1.241 1.273
AUD/USD 0.636 0.640 0.625
USD/CAD 1.402 1.410 1.390
USD/SGD 1.423 1.417 1.405
USD/HKD 7.752 7.760 7.770
NZD/USD 0.603 0.610 0.620
GBP/JPY 134.4 133.9 134.9
GBP/AUD 1.965 1.938 2.037
GBP/NZD 2.072 2.034 2.053
GBP/SGD 1.777 1.758 1.788
GBP/HKD 9.687 9.627 9.891
GBP/CHF 1.208 1.203 1.221

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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