Next Week’s FX Forecast & Events Dec 09, 2019

Trade talks face key deadline

US-China trade developments will continue to be watched very closely, especially with a key date next weekend.

As things stand, the US has pledged to impose more tariffs on Chinese goods on December 15th. The US Administration will, therefore, have key decisions to make this week. Any move to agree a trade deal, suspend the new tariffs and roll-back existing tariffs would provide a notable boost to market sentiment. 

Alternatively, tariff imposition could be delayed until next year with talks continuing which would be broadly neutral.

If these tariffs go into effect and there is no phase-one trade deal, confidence in the global economic outlook will decline sharply and there will be a fresh flood of funds into the yen and Swiss franc. 

US

The Federal Reserve will announce its latest monetary policy decision on Wednesday. There are very strong expectations that rates will be unchanged at 1.75% and there is no real chance of a change in rates.

The latest policy statement will be watched closely and Chair Powell will hold a press conference.

At this meeting, there will also be an update to the latest projections from Federal Reserve committee members. These projections will be important for underlying sentiment towards the 2020 interest rate policy.

The dollar will be supported initially if the projections suggest that rates will not be cut in 2020.

The latest CPI inflation data will be released on Wednesday and retail sales release on Friday.

UK

The latest GDP and industrial production data will be released on Tuesday. Data releases will, however, be overshadowed by political developments with the General Election on Thursday.  The exit poll will be released at 10.00pm UK time Thursday.

The final opinion polls will be watched closely with a particular focus on the important YouGov survey due for release after Tuesday’s New York close.

Indications of a Conservative Party majority would support Sterling, although further gains would be limited ahead of the vote. Overall volatility will inevitably be high after the result.

If Johnson does secure a victory, Sterling should secure further gains on expectations that Brexit will take place by January 31st. Any other result would trigger sharp short-term Sterling losses on renewed uncertainty and Brexit chaos.

Euro-zone

The ECB will announce its latest interest rate decision on Thursday. Although no policy changes are expected, the meeting will still be important, especially as it will be the first once presided over by Lagarde.  Her press conference will, therefore, be watched very closely for policy hints and medium-term direction. 

International

The Swiss National Bank will announce its latest quarterly interest rate decision on Thursday. Consensus forecasts are for rates to be on hold at -0.75%, but there has been some speculation of a rate cut.

Bank of Canada Governor Poloz is due to comment on the economy on Friday. Oil prices will also have an impact on the Canadian dollar.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.106 1.108 1.113
USD/JPY 108.6 109.4 108.3
EUR/GBP 0.842 0.825 0.820
GBP/EUR 1.188 1.212 1.220
GBP/USD 1.314 1.343 1.357
AUD/USD 0.684 0.689 0.695
USD/CAD 1.325 1.320 1.313
USD/SGD 1.361 1.358 1.355
USD/HKD 7.828 7.835 7.840
NZD/USD 0.656 0.660 0.670
GBP/JPY 142.6 146.9 147.0
GBP/AUD 1.922 1.949 1.953
GBP/NZD 2.002 2.035 2.026
GBP/SGD 1.787 1.824 1.839
GBP/HKD 10.28 10.52 10.64
GBP/CHF 1.300 1.339 1.354

 

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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