Foreign Exchange Prediction Highlights
USD FX forecast: The dollar will be subjected to choppy trading and will gain at times when equity markets decline, but the US currency overall is likely to lose ground.
EUR FX forecast: Overall Euro sentiment is likely to remain stronger in the short term, although there is scope for only limited gains from current levels.
GBP FX forecast: Sterling will be subjected to big moves during the week with the Bank of England set to announce further support. Tentative net gains are realistic given the cheap valuation.
JPY FX forecast: Any yen losses are likely to be limited given that overseas yields remain extremely unattractive for Japanese investors.
Markets on alert for US second spike
The US coronavirus developments will be an important influence following a significant increase in new cases in some key US states such as California, Texas and Florida. Two states have also put re-opening plans on hold.
Any further increases would increase speculation of a wider US second spike. This would undermine recovery prospects.
Although US sentiment would tend to weaken, there would also be an element of US dollar demand on defensive grounds.
Overall currency volatility is liable to increase during the week, especially if global coronavirus fears also increase again.
US Dollar foreign exchange prediction
The Federal Reserve made no policy changes at its policy meeting, but expects to keep zero interest rates for at least another two years.
The latest retail sales data is due on Tuesday. Business confidence data will be watched closely with the New York Empire survey on Monday and Philadelphia manufacturing survey on Thursday.
Fed Chair Powell will testify on the economy to Congress on Tuesday and Wednesday.
Stronger confidence from Powell would underpin sentiment, although political and coronavirus developments are likely to dominate as Powell is likely to stick to the script of offering unlimited economic support.
Sterling foreign exchange prediction
The latest labour-market data is due for release on Tuesday with expectations of a surge in reported unemployment while the latest CPI inflation data is scheduled for Wednesday.
The Bank of England will announce its latest policy meeting on Thursday. No change in interest rates is expected, but there are expectations that the policy committee will announce an increase in the bond-buying programme of at least $100bn.
The policy statement and vote split will also be important for Sterling sentiment with a particular focus on rhetoric surrounding the possibility of using negative interest rates.
Political developments surrounding UK/EU trade talks will also be important for Sterling. Prime Minister Johnson will hold talks with key EU officials on Monday and the EU Summit will also discuss progress on Thursday and Friday. Any sign of compromise in forthcoming talks would help support Sterling.
Euro foreign exchange prediction
This week, political considerations will tend to dominate with the EU leaders Summit on June 18/19th. Principal attention will be on the proposed EUR750bn rescue fund from the EU Commission. There will still be significant opposition to the plan and an acrimonious tone would undermine the Euro. If, however, there is evidence of unity and progress, the Euro would be likely to gain sharply.
International foreign exchange factors
The Bank of Japan will announce its latest monetary policy decision on Tuesday with no significant changes expected.
The Swiss National Bank will hold its quarterly policy meeting on Thursday. No change in interest rates is expected, but the rhetoric will be important for franc sentiment.
New Zealand GDP data is due on Thursday with Australian labour-market data on Thursday.
The latest Chinese industrial production and retail sales data is due on Monday. Weak data would undermine confidence in the global recovery.
Currency FX Forecast for Next Week
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