Next Week’s FX Forecast & Events Aug 24, 2020

Foreign Exchange Prediction Highlights

USD FX forecast:  Dollar sentiment will remain weak, but there is scope for a further limited correction, especially if global equity markets decline.

EUR FX forecast: The Euro will remain vulnerable to a setback given the very high number of long positions, especially if Euro-zone coronavirus cases increase further.

GBP FX forecast: Sterling will be unsettled by fears over failure to make headway on a trade deal, especially if global risk appetite is weaker.

JPY FX forecast: The Japanese yen should maintain a firm tone given underlying reservations over the global economy. 

Will speculators sell the Euro? 

The latest data continued to indicate that FX speculators such as hedge funds hold very long Euro positions at close to record highs. If unease over the risk of a correction increases, the Euro could be exposed to sharp selling, especially with liquidity still very low during the week ahead.

Coronavirus cases will be watched closely in the Euro-zone and US. The increase in Euro-zone cases has unsettled the Euro with the risk of further selling if cases continue to increase during the week ahead.

Markets continue to monitor US politics

Last week, Biden was confirmed as the Democrat Party candidate for November’s election. This week, the focus will switch to the Republican convention.  

Rhetoric from President Trump will be watched closely during the week with a particular focus on comments on US-China relations.

Fed policy hints in focus

The dollar gained some ground following the Federal Reserve minutes from July which suggested that there was still caution over introducing more aggressive monetary policies.

The Jackson Hole economic symposium will be held on August 27-28th. The importance of the event will be downgraded slightly this year given the virtual nature of the gathering.

Nevertheless, Fed Chair Powell will be making a speech on the outlook for monetary policy and this will be important given the potential for hints over policy changes at the September meeting.

The dollar will tend to be vulnerable if there are hints over more aggressive Fed policies at the next meeting.

US Dollar foreign exchange prediction

The data releases overall are unlikely to have a major impact, although the jobless claims data will still be an important focus during the week on Thursday, especially after the increase rported last week. The revised second-quarter GDP data will be released on Thursday with the potential for an upward revision.

Sterling foreign exchange prediction

Bank of England Governor Bailey is due to speak at the Jackson Hole symposium. Sterling will react to any hints over further monetary policy easing by the central bank this autumn.

Trade developments will continue to be watched closely after the latest round of talks with the EU failed to make headway in last week’s latest negotiating round. EU Chief Negotiator Barnier again criticised the UK government strongly.

Sterling will tend to be more vulnerable if there are increased market fears that no trade deal will be reached.

Euro foreign exchange prediction

There are only limited data releases, but markets will watch the German business confidence data following the unexpected dip in confidence in Euro-zone confidence released last week. 

Euro confidence will be sapped if there are fears that the economic recovery will stall. 

International foreign exchange factors

Overall conditions in global equity markets and risk appetite will have an important impact on commodity currencies.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.179 1.165 1.175
USD/JPY 105.8 106.4 105.0
EUR/GBP 0.901 0.907 0.899
GBP/EUR 1.110 1.103 1.112
GBP/USD 1.309 1.284 1.307
AUD/USD 0.716 0.712 0.705
USD/CAD 1.318 1.328 1.330
USD/SGD 1.372 1.377 1.371
USD/HKD 7.751 7.755 7.760
NZD/USD 0.654 0.647 0.642
GBP/JPY 138.4 136.7 137.2
GBP/AUD 1.828 1.804 1.854
GBP/NZD 2.001 1.985 2.036
GBP/SGD 1.795 1.769 1.792
GBP/HKD 10.14 9.96 10.14
GBP/CHF 1.194 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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