Foreign Exchange Prediction Highlights
USD FX forecast: The dollar will gain some ground if global coronavirus fears increase further, but longer-term losses remain likely given deteriorating US fundamentals.
EUR FX forecast: Overall Euro sentiment is likely to remain solid, but positive news on the EU recovery fund will be needed to make headway.
GBP FX forecast: Sterling sentiment will remain negative in the short term, although there is scope for partial recovery from recent losses.
JPY FX forecast: The Japanese yen should be able to resist significant losses given a more fragile global risk tone.
Global coronavirus developments remain in focus
Coronavirus developments in the US and China will continue to be monitored closely during the week. There has been a fresh outbreak in Beijing with Chinese authorities claiming that the outbreak is under control. The most likely outcome is that China will succeed in keeping the situation under control.
In the US, there has been a gradual overall increase in new cases led by Texas, Florida and Arizona. A further increase in cases would tend to undermine global risk appetite and also undermine confidence in the US economic outlook.
A key focus will be whether there are fresh lockdown measures announced and whether there is any response by the Federal Reserve.
Overall defensive dollar demand could increase, but confidence in US fundamentals would be liable to weaken further which would eventually undermine the US currency.
US Dollar foreign exchange prediction
The latest PMI data is scheduled for release on Tuesday. Overall reaction is likely to be subdued unless there is a very substantial move in the index. Jobless claims data will again be watched closely on Thursday.
Comments from Fed officials will be monitored, although the very expansionary policies will continue. Overall coronavirus developments are liable to dominate.
Sterling foreign exchange prediction
The latest PMI business confidence data is due on Tuesday with a further recovery from May, but indices will remain in contraction territory.
Markets will monitor political developments closely ahead of the more intensive round of UK-EU trade talks due to start on June 29th.
Sterling overall will need an injection of positive news to shift underlying negative sentiment towards the UK currency, especially given the threat of increased hedge-fund selling.
Euro foreign exchange prediction
The latest Euro-zone business confidence data will be released on Tuesday with flash readings for June. There will be a further strong recovery from May levels, but markets will attempt to assess the underlying strength of the recovery.
The EU failed to agree on the EUR750bn recovery fund at last week’s Summit. Political developments will continue to be monitored closely in the short term with pressure to reach agreement during the next few weeks. The Euro will move higher if opposition to the recovery fund fades, but gains will be limited given that speculators have already bought the currency aggressively.
International foreign exchange factors
The Reserve Bank of New Zealand will release its latest policy decision on Wednesday with interest rates expected to be held at 0.25%. Comments on the economic recovery and the asset-purchase programme will be important for New Zealand dollar sentiment.
Currency FX Forecast for Next Week
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