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

Coronavirus developments will still dominate sentiment

Developments surrounding the coronavirus will continue to be monitored very closely in the week ahead as China looks to re-start production after the extended new-year holiday.

Any evidence that the number of cases in China is peaking would help support risk appetite and limit fears over the global economy. 

In contrast, a sharp increase in the number of global cases and a fresh acceleration in Chinese cases would undermine confidence and trigger fresh demand for defensive currencies such as the yen.

Any increase in global travel restrictions would also increase fears over the negative global growth impact. 

US

The latest CPI inflation data is due on Thursday with the retail sales release on Friday. The overall impact is likely to be limited unless the inflation data is substantially away from consensus expectations. At this stage, there is very little chance that the Federal Reserve will look to change interest rates in the short term.

Fed Chair Powell will testify to Congress during the week with an appearance before the House of Representatives on Tuesday. The most likely outcome is that he will repeat recent comments that the Fed is on hold, but the overall tone will still need to be monitored closely.

The New Hampshire primary will be held on February 11th and the outcome may significantly cut the number of Democrat candidates.

UK

The latest GDP and industrial production data will be released on Tuesday following notably weak data for the previous month. Market expectations are for a limited recovery in the monthly data.

Comments from Bank of England Governor Carney will be monitored to assess whether there is any shift in tone within the policy committee.

Global risk conditions will be important with Sterling at risk if the international economy appears to be at risk of a sharp slowdown.

Euro-zone

The latest German GDP data is due on Friday with expectations of quarterly growth of 0.1%. Any negative reading would reinforce negative Euro-zone sentiment.

The strong Euro-zone current account surplus should still provide an element of currency protection.

International

The Reserve Bank of New Zealand will announce its latest interest rate decision on Wednesday local time with consensus forecasts for rates to remain at 1.0%. If rates are left on hold, forward guidance from the bank will be important.

Commodity currencies will continue to be influenced strongly by developments in the coronavirus with further weakness if fears intensify.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.095 1.092 1.107
USD/JPY 109.7 110.0 108.8
EUR/GBP 0.849 0.842 0.835
GBP/EUR 1.178 1.188 1.198
GBP/USD 1.290 1.297 1.326
AUD/USD 0.667 0.660 0.680
USD/CAD 1.331 1.334 1.318
USD/SGD 1.390 1.395 1.380
USD/HKD 7.767 7.780 7.790
NZD/USD 0.641 0.640 0.660
GBP/JPY 141.5 142.7 144.2
GBP/AUD 1.934 1.965 1.950
GBP/NZD 2.012 2.026 2.009
GBP/SGD 1.793 1.809 1.830
GBP/HKD 10.02 10.09 10.33
GBP/CHF 1.259 1.271 1.293

 

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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