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

Coronavirus developments continue to dominate

Developments surrounding the coronavirus will continue to have an important impact on currency markets

Investors will be monitoring evidence on Chinese production trends which will, in turn, have an important impact on global manufacturing trends. Chinese demand conditions will also be a key element for Euro-zone exports. Confidence in the global economy will tend to weaken if there is evidence that Chinese companies are struggling to regain production levels.

The extent of global cases and the potential economic impact will also be key factors given recent evidence that the number of international cases are increasing. Increased travel restrictions would also increase unease over the global economic impact.

Currency rhetoric watched closely

The dollar remains close to 3-year highs and there is still an important risk that US protests against dollar strength will intensify with claims that Europe is looking to gain an unfair advantage. Direct US action to weaken the dollar should not be ruled out.

US

Consumer confidence data is due on Tuesday, but the Chicago PMI index is likely to have the most important impact during the week after unexpected weakness in the national PMI data released last week and a very weak Chicago release last month. 

Markets will continue to monitor comments from Federal Reserve officials and interest rate expectations to assess whether there is any realistic chance of a cut in interest rates during the first half of 2020.

UK

There are no major economic data releases scheduled during the week.

Political considerations will be significant with the UK due to announce its trade negotiating objectives during the week ahead with official talks between the two sides due to start the following week. An aggressive stance would tend to undermine Sterling sentiment.

Bank of England chief economist Haldane will make speeches on Monday and Friday which could have important implications for UK interest rate expectations. Haldane has generally opposed any cut in interest rates and his opinions will hold considerable sway within the bank.

Euro-zone

The German IFO business confidence indicator will be important, especially after a sharp decline in the ZEW survey released last week. 

Comments from ECB officials will be watched closely during the week.

International

The latest Chinese PMI manufacturing data is scheduled for release on Saturday local time. The data will be very important for global sentiment, especially as there will be a substantial impact from the coronavirus outbreak. 

New Zealand ANZ business confidence data is due on Thursday local time. Any commentary from central bank officials will also be watched closely.

Commodity currencies overall are still likely to be dominated by Chinese and global coronavirus developments.

Currency FX Forecast for Next Week