Foreign Exchange Prediction Highlights
USD FX forecast: Underlying fears over increasing US coronavirus developments cases could again work both ways for the dollar, but overall losses are likely as confidence in the US outlook fades.
EUR FX forecast: The Euro should find solid support on any dips but, again, will need progress on agreeing the recovery fund to make significant headway.
GBP FX forecast: Sterling will gain an element of support from further economic re-opening measures, but should be resilient unless there is a sharp downturn in global equities.
JPY FX forecast: The Japanese yen should continue to be supported by the underlying lack of yield for other major currencies.
Mixed dollar impact from US coronavirus developments
Coronavirus developments in the US will continue to have an important impact on sentiment. Last week, the US overall registered its highest daily increase in infections on record with a figure above 65,000.
A further increase this week would increase fears over a damaging impact on the economy. It would, however, also maintain expectations of extremely accommodative policies by the Federal Reserve.
Expectations of very low interest rates will underpin risk appetite while pressure for further fiscal support packages would increase unease over the US budget developments.
For now, the dollar will remain correlated with trends in risk. If equities fall, the dollar will tend to strengthen on defensive demand while it will weaken if global markets move higher.
Overall, the dollar is liable to lose ground as fundamentals weaken.
US Dollar foreign exchange prediction
The latest CPI inflation data is due on Tuesday, but little impact is likely as there will be no impact on interest rate expectations.
Retail sales data on Thursday is likely to attract greater attention. Market expectations are for a further significant increase in sales for the month.
The reaction is liable to be counter-intuitive with dollar likely to weaken slightly if the data is strong while there will be small gains on weaker than expected data as equity markets would be likely to fall.
Sterling foreign exchange prediction
The latest industrial production data is due on Tuesday with the latest monthly GDP estimate also due for release. Markets are expecting a recovery for May following the slide for April.
Latest inflation data is due on Wednesday with little impact likely.
Trade talks between the UK and EU will continue to be monitored closely with some Sterling support if there are signs of compromise.
Euro foreign exchange prediction
The ECB will hold its latest policy meeting on Thursday. No major moves are expected following the large expansion to the bond-purchase programme announced at the previous meeting.
The forward guidance from the bank will still be important for underlying Euro sentiment.
Political developments will also be important with the latest summit meeting on Friday. The Euro will weaken slightly if there is no progress on agreeing the recovery fund.
International foreign exchange factors
The Reserve Bank of Canada will announce its latest policy decision on Wednesday with rates expected to remain on hold at 0.25%. This will be the first full meeting with Macklem as Governor and the latest monetary policy report will also be released. The announcements on bond purchases and wider forward guidance will be important for Canadian dollar sentiment.
The Bank of Japan will announce its latest policy decision on Wednesday, no policy changes are expected.
China is scheduled to release its latest trade data on Tuesday. The latest GDP and industrial production data is due on Thursday.
New Zealand CPI inflation data is due on Thursday local time while Australian labour-market data is also due on the same day.
Currency FX Forecast for Next Week
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