Coronavirus exit strategies in focus
Global exit strategies by Europe and US will again be an important focus during the week. European countries are starting to ease lockdown restrictions very slightly and this process will continue.
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.
Progress in developing effective treatments and a vaccine will continue to be monitored and will have an impact on global risk appetite.
Political developments crucial for longer-term FX forecasts
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. Markets will continue to monitor 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 government spending. In the medium term budget deficits will be crucial for FX forecasts
US Dollar foreign exchange prediction
The Federal Reserve will hold its latest scheduled policy meeting on Wednesday and Chair Powell will hold a press conference.
There will be no changes to interest rates, but there could be further changes to other economic support measures including the buying of bonds by the central bank.
Markets will also be looking for some guidance on the outlook and potential recovery profile.
The first estimate for first-quarter GDP will also be released with estimates of a contraction close to 3.0%, although this will be an erratic release.
Jobless claims will again be an important release and there should be a further decline for the week. The latest consumer confidence data is due on Tuesday.
The ISM business confidence data for manufacturing is due for release on Friday
Sterling foreign exchange Prediction
There are no major data releases during the week, although markets will watch the final manufacturing PMI release on Friday. Any slight improvement from the flash reading would underpin market sentiment.
Political developments will be watched closely to see if there is any shift in rhetoric surrounding EU/UK trade talks. The return of Prime Minister Johnson to office should be positive for the Sterling FX forecast.
Euro foreign exchange prediction
The ECB will hold its latest policy meeting on Thursday. No change in interest rates is expected, but there are likely to be further changes to the bond-buying programme to provide additional support to individual countries.
President Lagarde’s press conference will be an important focus after a gaffe last time around which triggered selling in Italian bonds. The behaviour of Italian bonds after this meeting will be one important factor for the Euro.
International FX forecast influences
The Bank of Japan will announce its latest policy decision on Tuesday. There has been speculation that the bank would announce a further relaxation of monetary policy with unlimited buying of bonds, although the yen impact would be limited.
Australia will release first-quarter inflation data on Wednesday, but the impact should be limited.
China will release the latest PMI business confidence data on Thursday with a further net recovery expected from the earlier slump. Markets will be monitoring progress in supporting domestic demand and developments in the export sector. A stronger than expected PMI release would underpin global risk appetite.
Currency FX Forecast for Next Week
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