Next Week’s FX Forecast & Events Feb 17, 2020

Coronavirus developments will continue to have an important impact

Developments surrounding the coronavirus outbreak will continue to be monitored closely.

Evidence that the number of new cases in China is slowing would help underpin risk appetite and lessen demand for the Japanese yen and Swiss franc

In contrast, a jump in overseas cases and evidence of substantial damage to the economic outlook would trigger renewed yen demand and an increase in fear. 

Currency rhetoric watched closely

The fresh bout of dollar strength and Euro weakness will increase frustration in the White House and there is likely to be more aggressive rhetoric from President Trump in calling for lower interest rates and a weaker dollar.

US

Federal Reserve minutes from January’s meeting will be released on Wednesday, although there is unlikely to be a significant impact on interest rate expectations, especially as the meeting was held before coronavirus fears intensified.

Business confidence data will be watched closely during the week starting with the New York manufacturing data on Tuesday. The Philadelphia release is due on Thursday with the national PMI release on Friday.

These PMI releases will be important in determining whether the US economy will continue to improve this quarter.

UK

There are significant data releases during the week which will have an important impact on Sterling sentiment. The labour-market data due on Tuesday and the latest inflation data is scheduled for Wednesday with the headline rate expected to increase to 1.7% from 1.3%. A sharper increase would further dampen any expectations of a Bank of England rate cut. The retail sales data is due on Thursday following a weak release last month.

Most importantly, the latest flash PMI business confidence is due on Friday. There was a big improvement in confidence for January after the General Election. A further boost to confidence would reinforce more positive sentiment towards the UK economy and also make a near-term Bank of England interest rate cut less likely.

There will be fresh concerns over the economic outlook if there is renewed weakness in the survey data.

Euro-zone

The German ZEW investor confidence data is due on Tuesday after a sharp increase for last month.

The PMI business confidence data is due on Friday which will also be very important for Euro-zone sentiment. Renewed deterioration in German manufacturing would reinforce a lack of confidence in the outlook and maintain selling pressure on the Euro, although strong data could force a reassessment.

International

The latest Australian labour-market data is due on Thursday and will have an important impact on Reserve Bank policy expectations.

Canadian inflation data is scheduled for Wednesday with increased expectations of a Bank of Canada rate cut if the data is weaker than expected.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.085 1.080 1.100
USD/JPY 109.9 110.2 108.8
EUR/GBP 0.832 0.830 0.820
GBP/EUR 1.202 1.205 1.220
GBP/USD 1.303 1.301 1.341
AUD/USD 0.672 0.670 0.680
USD/CAD 1.325 1.320 1.312
USD/SGD 1.390 1.392 1.379
USD/HKD 7.768 7.780 7.790
NZD/USD 0.644 0.647 0.660
GBP/JPY 143.2 143.4 145.9
GBP/AUD 1.940 1.942 1.973
GBP/NZD 2.024 2.011 2.033
GBP/SGD 1.812 1.811 1.850
GBP/HKD 10.12 10.12 10.45
GBP/CHF 1.280 1.289 1.317

 

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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