Next Week’s FX Forecast & Events Jan 20, 2020

US-China trade relations still important

The phase-one trade deal between the US and China has been signed. Attention will now focus on implementation on the deal and any developments on the second phase of talks. 

Positive rhetoric from both sides and the promise of further talks would tend to underpin global risk appetite and limit demand for the Japanese yen.

US

The latest business confidence data is due on Friday with a particular focus on the manufacturing sector, although overall releases will be limited.

Political developments will be monitored closely in the media with President Trump set to face a Senate impeachment trial. The most likely outcome is that there will be no significant market impact, but there is no room for complacency. 

There will be no comment from Federal Reserve officials ahead of the central bank policy meeting the following week.

US dollar direction is likely to be driven more by the degree of confidence in the global economy rather than domestic US developments.

If confidence in the global outlook strengthens, there will be increased potential for investors to move out of the dollar and into other major currencies.

UK

The latest business confidence data will be released on Friday and this release will be very important for underlying Sterling sentiment. A notable improvement following the December election would boost confidence and also make the Bank of England less likely to cut interest rates with the policy decision due the following week.

Weak data would reinforce pressure for interest rates to be cut and undermine the currency. Political rhetoric will be monitored with the UK set to leave the EU at the end of the following week with tough EU rhetoric liable to unsettle Sterling slightly.

Euro-zone

The ECB will hold its first policy meeting on Thursday with no change in interest rates expected. Forward guidance from President Lagarde in the press conference is likely to be the key element.

The latest Euro-zone PMI business confidence data is due on Friday and will be very important for underlying Euro sentiment. Failure to register any significant improvement would be an important setback for the region while a significant improvement would lift currency sentiment.

International

The Canadian CPI inflation rate is due on Wednesday and the Bank of Canada will announce its latest interest rate decision on the same day. The central bank will release its more detailed monetary policy report at this meeting and Governor Poloz will hold a press conference. 

The Bank of Japan will announce its latest policy decision on Tuesday with no change in interest rates expected.

Australian employment data will be released on Thursday and will be important for Reserve Bank of Australia interest rate expectations.

New Zealand CPI inflation rate is due on Friday local time and will also be important for Reserve Bank of New Zealand interest rate expectations.

 

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.109 1.112 1.120
USD/JPY 110.1 110.4 108.8
EUR/GBP 0.853 0.850 0.839
GBP/EUR 1.172 1.176 1.192
GBP/USD 1.300 1.308 1.335
AUD/USD 0.687 0.692 0.700
USD/CAD 1.306 1.300 1.294
USD/SGD 1.348 1.347 1.344
USD/HKD 7.770 7.780 7.790
NZD/USD 0.661 0.670 0.677
GBP/JPY 143.1 144.4 145.2
GBP/AUD 1.892 1.891 1.907
GBP/NZD 1.967 1.953 1.972
GBP/SGD 1.752 1.762 1.794
GBP/HKD 10.10 10.18 10.40
GBP/CHF 1.258 1.271 1.299

 

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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