Foreign Exchange Prediction Highlights
USD FX forecast: The dollar overall is likely to weaken, but there will be significant gains at times, potentially by the end of June, when fear over the global outlook increases again.
EUR FX forecast: The Euro can gain further in the very short term on optimism over a recovery fund, but selling is likely to return if political disagreements persist.
GBP FX forecast: Sterling will continue to be hampered by speculation over negative interest rates and trade fears, although losses should be limited given its cheap valuation.
JPY FX forecast: Yen losses overall should remain limited given that all other major currencies remain unattractive from Japan’s perspective.
US-China relations will remain a key concern
There was relief on Friday following President Trump’s latest rhetoric on China as he did not move to impose immediate sanctions or any withdrawal from the phase-one trade deal
There will, however, still be important underlying concerns due to the seriousness of underlying tensions.
Given the domestic political tensions and criticism of the White House, there will also be an increased risk that the US will look to deflect criticism by attacking China.
The Chinese yuan trend will be monitored closely with some dollar support is the yuan continues to weaken.
Wider trends in risk developments will also be important. The underlying trend has been slightly perverse with the dollar tending to strengthen on negative US news as defensive US dollar demand increases. If the dollar fails to gain on ‘bad’ news, this will be a sign that underlying US currency sentiment has weakened.
US Dollar foreign exchange prediction
There will be important data releases during the week which will have an impact on sentiment within currency markets, although there is still an important question over how large the actual market impact will be.
The ISM manufacturing business confidence data is due on Monday with the non-manufacturing release on Wednesday.
Labour-market data will tend to dominate with the ADP release on private-sector jobs for and monthly jobs report on Friday.
Consensus forecasts are for a further decline in non-farm payrolls of around 8.0 million and an increase in the unemployment rate to 19.5%. Any unemployment rate below 20% would provide some relief.
Federal Reserve should be silent
There should be no comments from US central bank officials during the week with officials in the blackout period before the June 10th policy meeting.
Sterling foreign exchange prediction
EU-UK trade talks will be a key focus during the week with the final round of talks in the current phase. The tone will be very important for Sterling sentiment ahead of the June 18/19 EU Summit.
The domestic political developments will also be important given underlying criticism of the government’s coronavirus stance.
Overall trends in global risk appetite are, however, likely to have a more important underlying impact. Sterling will tend to gain support when risk conditions are strong while weakness in global equities would tend to weaken the UK currency.
Overall Sterling sentiment is likely to remain weak.
Euro foreign exchange prediction
The ECB will hold its regular policy meeting on Thursday with consensus forecasts for no change in benchmark interest rates. There are expectations that the bank will announce an expansion of its bond-buying programme. President Lagarde’s press conference will also be important for market sentiment.
Political developments will also be important for currency markets as France and Germany attempt to win backing for the EU Commission recovery package of EUR750bn including EUR500bn in grants which is opposed by several countries.
International foreign exchange factors
The Reserve Bank of Australia will hold announce its latest policy decision on Tuesday with rates expected to remain at 0.25%. Comments on the outlook will be important for Australian dollar sentiment.
Australian GDP data for the first quarter will be released on Wednesday.
The Bank of Canada is also likely to maintain its benchmark rate at 0.25% following Wednesday’s policy meeting. Comments on the outlook.
Canada will also release its latest jobs data on Friday with expectations that the unemployment rate will increase to around 15%.
Currency FX Forecast for Next Week
|Currency pair||Spot||1-week forecast||1-month forecast|