Next Week’s FX Forecast & Events Aug 10, 2020

Foreign Exchange Prediction Highlights

USD FX forecast:  The dollar will remain vulnerable, especially given the lack of yield support, but there is still scope for a correction recovery after sharp losses.

EUR FX forecast: The Euro will remain vulnerable to a limited correction weaker after very strong gains during the past month.

GBP FX forecast: Although dollar vulnerability will continue to provide protection, Sterling is liable to edged lower amid unemployment and trade fears.

JPY FX forecast: Japanese yen buying is again likely to be curtained by fears that the Bank of Japan will be ordered to intervene to weaken the currency. 

Volatility remains a seasonal threat

A lack of liquidity will again be a feature in global markets this week as overall trading volumes remain low due to the summer holiday period in North America and Europe. 

There will be the risk of volatile moves across all asset classes and especially in currency markets.

Markets continue to monitor US politics

US political developments will remain important during the week ahead. Congressional negotiators and the US Administration failed to reach a deal on a new fiscal stimulus package at the end of last week.

Congress is now scheduled to be in recess for the rest of August while President Trump has threatened to take executive action to restore some benefits.

The labour market will be an important focus amid fears that momentum is slowing despite better than expected employment data last week. 

In this context, Thursday’s jobless claims data will be a key market focus during the week. Without support measures, unease over the economic outlook will continue. 

The domestic coronavirus developments will continue to be watched closely during the week ahead.

US Dollar foreign exchange prediction

The consumer prices data is due for release on Wednesday with the retail sales release on Friday.

The sales data will be important to assess whether there has been a slowdown in demand as coronavirus cases have increased.

Sterling foreign exchange prediction

Labour-market data is due on Tuesday with further underlying strains likely, although the headline unemployment rate will continue to be held down by the furlough scheme with market expectations of a 4.2% rate.

The latest UK GDP data is due for release on Wednesday with consensus forecasts for a contraction of 20.5% for the second quarter. A lower rate of contraction would provide an element of Sterling support.

Hints on trade negotiations will be watched closely during the week.

Euro foreign exchange prediction

The latest data releases are unlikely to have a significant market impact. Markets will be monitoring comments from ECB officials closely given the possibility that there will be a protest against Euro strength. 

International foreign exchange factors

The Reserve Bank of New Zealand will announce its latest policy decision on Wednesday. No change in rates is expected from 0.25, but there could be an adjustment to the bond-purchase programme and forward guidance from the bank will be important for the New Zealand dollar. The currency tends to perform relatively poorly during August. 

The Australian employment data is due on Thursday with employment forecast to increase slightly on the month with the unemployment rate increasing to 7.8% from 7.4%.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.179 1.163 1.175
USD/JPY 105.9 106.4 105.0
EUR/GBP 0.902 0.907 0.899
GBP/EUR 1.109 1.103 1.112
GBP/USD 1.307 1.282 1.307
AUD/USD 0.716 0.712 0.703
USD/CAD 1.339 1.350 1.342
USD/SGD 1.373 1.377 1.370
USD/HKD 7.751 7.755 7.760
NZD/USD 0.661 0.660 0.654
GBP/JPY 138.4 136.4 137.2
GBP/AUD 1.826 1.801 1.859
GBP/NZD 1.977 1.943 1.998
GBP/SGD 1.795 1.766 1.791
GBP/HKD 10.13 9.944 10.14
GBP/CHF 1.193 1.191 1.205

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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