Foreign Exchange Prediction Highlights
USD FX forecast: Dollar confidence will remain fragile, but there is scope for a limited net correction given the extent of recent speculative selling surrounding the US currency.
EUR FX forecast: The Euro will remain vulnerable to a limited correction lower given its over-bought condition, especially if US bond yields edge higher.
GBP FX forecast: Sterling will struggle for direction and global events are liable to dominate despite trade talks with limited short-term losses realistic.
JPY FX forecast: Japanese yen losses are likely to be limited given significant unease over the global economic recovery profile.
Choppy trading will continue on seasonal grounds
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.
In these circumstances, there will be the risk of volatile moves across all asset classes including currencies, especially if there are important geo-political developments.
Markets continue to monitor US politics
US political developments will remain important during the week ahead after attempts to revive talks between congressional negotiators and the White House failed gain. Congress is not due to be in session until early September, reinforcing near-term deadlock.
The labour market will be an important focus amid fears that momentum is slowing despite better than expected jobless claims data last week.
Without further support measures, unease over the economic outlook will continue despite a solid reading for July retail sales.
Any breakthrough would be likely to boost dollar sentiment.
The domestic coronavirus developments will also continue to be watched closely during the week ahead amid evidence that new infection rates are slowing.
US Dollar foreign exchange prediction
The latest PMI business confidence data will be released on Friday and any fresh downturn would tend to undermine market confidence in the wider US recovery profile.
Jobless claims data will be released on Thursday with minutes from July’s Federal Reserve policy meeting due on Wednesday.
Markets will be looking for any hints in the minutes as to whether the Fed is likely to ease monetary policy further at the September meeting by adopting a policy to cap bond yields. Hints of further action would tend to undermine the dollar.
Sterling foreign exchange prediction
The UK business confidence data will be an important factor during the week with markets looking to assess whether the recovery is continuing after a strong rebound for last month’s data.
Inflation data on Wednesday is unlikely to have a significant impact.
EU trade negotiations will be watched closely during the week, although any breakthrough is unlikely at this stage.
Euro foreign exchange prediction
The latest PMI business confidence data will be watched closely on Friday with expectations of a further slight net improvement in confidence.
Coronavirus developments will continue to be monitored closely with any further tightening of travel restrictions and renewed lockdown measures having a negative impact on the Euro.
Despite the holiday season, markets will again be monitoring comments from ECB officials closely given the possibility that there will be a protest against Euro strength.
International foreign exchange factors
After a very volatile week, trends in precious metals will be watched closely. After surging to record highs above $2,000 per ounce, gold was subjected to a sharp correction. If gold moves higher, the dollar will find it more difficult to make headway.
Currency FX Forecast for Next Week
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