Next Week’s FX Forecast & Events Jan 13, 2020

Trade deal should be signed

The phase-one trade deal between the US and China is due to be signed on January 15th with a 10-strong delegation from China travelling to Washington. Assuming there is no last-minute hitch, signing of the deal should help underpin risk appetite, although the impact is likely to be limited, especially with expectations that there will be little progress towards the second phase of talks.

Middle East tensions could still be important

At this stage, there is optimism that there will be no further US military strikes on Iranian targets with immediate tensions remaining lower. Markets will still be monitoring developments closely, but defensive yen demand is likely to remain weaker. 

US

The latest CPI data is due on Tuesday with a limited increase in prices expected for the month while the latest retail sales release is due on Thursday. Unless prices rise much more than expected, the impact is likely to be limited with the Federal Reserve not looking to change interest rates in the short term. 

Strong data would, however, trigger a further dip in expectations that rates could be cut during the year ahead. 

Latest regional business surveys will also be an important element.

UK

Industrial production and GDP data are due on Monday while the latest inflation data will be released on Wednesday and retail sales data on Friday.

The data will be monitored closely, especially with Bank of policy-makers hinting that interest rates could be cut relatively soon if there is no improvement in the forthcoming data releases.

Low inflation would make it easier for the central bank to consider cutting interest rates.

Comments from Bank of England officials will also be an important focus during the week.

Euro-zone

The latest ECB minutes from December’s meeting are due for release on Thursday. Markets will be looking for any evidence of support for a change in the inflation target. Any shift towards a higher target would tend to undermine the Euro over the medium term.

German business confidence will also be a significant element during the week.

International

The Bank of Canada business outlook survey will be released on Monday and this survey does have an important impact on central bank policy. A robust set of readings would dampen expectations of any cut in interest rates.

New Zealand business confidence data is due for release on Tuesday local time and will also have a significant impact on currency sentiment.

Chinese industrial production and retail sales data are due on Friday with markets expecting a slight slowdown from the previous month.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.112 1.115 1.122
USD/JPY 109.5 110.0 108.7
EUR/GBP 0.853 0.850 0.839
GBP/EUR 1.172 1.176 1.192
GBP/USD 1.304 1.312 1.337
AUD/USD 0.690 0.692 0.702
USD/CAD 1.306 1.295 1.292
USD/SGD 1.349 1.349 1.346
USD/HKD 7.770 7.780 7.790
NZD/USD 0.666 0.680 0.675
GBP/JPY 143.7 144.3 145.4
GBP/AUD 1.889 1.896 1.905
GBP/NZD 1.957 1.929 1.981
GBP/SGD 1.759 1.770 1.800
GBP/HKD 10.13 10.21 10.42
GBP/CHF 1.268 1.276 1.305

 

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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