Foreign Exchange Prediction Highlights
USD FX forecast: Underlying fears over increasing US coronavirus cases could work both ways for the dollar, but overall losses are likely as confidence in fundamentals fades.
EUR FX forecast: The Euro should fund a secure bases, but will need definite progress towards a EU recovery fund to post notable gains.
GBP FX forecast: Sterling sentiment will remain fragile, especially given trade fears, although underlying evidence suggests selling pressure has eased.
JPY FX forecast: The Japanese yen should be supported by the underlying lack of yield in other major currencies with slight gains possible.
Mixed dollar impact from US coronavirus developments
Coronavirus developments in the US will remain an important focus for global currency markets. The number of US infections increased to a record high last week with further increases in states such as Florida and Arizona.
Several US states have been forced to suspend re-opening measures and some restrictions have been re-imposed.
There will again be a mixed impact on markets. Overall confidence in US fundamentals is liable to weaken with concerns that the underlying recovery will slow sharply and this will tend to erode dollar confidence.
If fear increases, however, the dollar will still tend to gain defensive support as investors look to buy the US currency due to its qualities of strong liquidity.
The balance of these forces will be important for underlying currency-market direction with the bias skewed towards net losses.
US Dollar foreign exchange prediction
The latest ISM non-manufacturing data will be released on Monday following strong data for the manufacturing data with expectations that the economy moved back into expansion territory.
Labour-market developments will remain important following the latest jobs report. The BLS reported that non-farm payrolls increased by a record 4.8 million following the 2.7 million increase the previous month. The unemployment rate also declined to 11.2% for the month from 13.3% the previous month.
The labour market was boosted by a return to work for temporary workers, although the number of long-term jobless increased again. There will be concerns that the fresh increase in US coronavirus cases and need to suspend some re-opening measures will trigger a fresh increase in unemployment over the next few months.
Sterling foreign exchange prediction
There are no major economic data releases during the month. Chancellor Sunak will announce further measures to support the economy in his economic statement due on Wednesday with most attention likely to be focussed on the labour market.
UK/EU trade talks will remain an important market element with talks set to continue this week in London. The latest round last week concluded no significant progress in talks and another period of no progress would tend to undermine Sterling confidence.
Euro foreign exchange prediction
There are no major economic developments scheduled for the week. Political developments will be important with the Eurogroup holding a meeting on Thursday. The main focus will be on progress towards securing a recovery fund for the EU.
The Euro will need evidence that a deal is close to make significant headway.
International foreign exchange factors
The Reserve Bank of Australia will announce its latest policy decision on Tuesday with rates expected to remain on hold at 0.25%. Markets will be looking at commentary on bond buying and the economic outlook.
The latest Canadian labour-market data will be released on Friday with further strong employment gains expected for the month.
Currency FX Forecast for Next Week
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