Foreign Exchange Prediction Highlights
USD FX forecast: Although the dollar will gain some defensive support if US coronavirus fears intensify, a slide in US economic confidence is liable to weaken the currency.
EUR FX forecast: The Euro is likely to be underpinned by a lack of confidence in other major currencies, but will need positive news of the recovery fund to make notable headway.
GBP FX forecast: Sterling sentiment will remain negative in the short term amid trade fears and underlying unease over the economic outlook.
JPY FX forecast: The Japanese yen should be supported by underlying reservations over the global economic outlook.
Mixed dollar impact from US coronavirus developments
Coronavirus developments within the US will inevitably remain an important focus, especially given the sharp increase in cases seen in many states across the South and West.
Over the weekend, Texas and Florida recorded further increases in new infections and some lockdown measures have been re-imposed while other re-opening measures have been postponed.
The restrictions in some states will hamper the US economic recovery, especially given the importance of them for the overall economy.
There will be a mixed dollar impact which will lead to further volatile conditions. There will be fragile global risk appetite and the US currency will gain an element of defensive support.
Overall confidence in the US is, however, liable to weaken which will also tend to undermine the US dollar as alarm over the outlook increases.
Volatility surrounding month-end trading
There is likely to be volatile trading around the month-end period with the last day of June on Tuesday. There will be major position adjustment at the end of the second quarter which will influence currency markets and increase the risk of volatile conditions in FX markets. The dollar and Sterling will be susceptible to sharp moves.
US Dollar foreign exchange prediction
Federal Reserve Chair Powell will testify to Congress on Tuesday and his comments on the outlook will be monitored closely with expectations that he will continue to pledge strong support for the economy.
Most attention is likely to focus on employment data, especially after the shock release last month when the data reported an unexpected sharp increase in payrolls and decline in unemployment.
Unusually, the jobs data will be reported on Thursday due to the Independence Day holiday on Friday.
Consensus forecasts at this stage are for a further increase in payrolls of around 3.0mn and further decline in the unemployment rate to 12.5%. The impact of strong data would be offset by fears of fresh economic weakness.
The ADP employment data will be released on Wednesday. The ISM manufacturing data releases is also scheduled on the same day which will be an important for underlying confidence in the outlook.
Sterling foreign exchange prediction
The final PMI releases are due during the week, although the impact should be limited.
Comments from Bank of England members will be monitored closely with Vlieghe and Haskel due to speak during the week.
Political and trade developments will be important with the latest round of UK/EU trade talks due to take place during the week while Prime Minister Johnson is due to outline the government’s post-coronavirus economic strategy in a speech on Tuesday.
Euro foreign exchange prediction
Political developments will be important with the EU still looking to secure approval for the proposed EUR750bn recovery fund. German Chancellor Merkel and French President Macron are due to meet on Monday. Any evidence of political headway would tend to support the Euro.
International foreign exchange factors
The latest Chinese PMI business confidence data is due for release during the week which will be important for underlying confidence in the domestic and global outlook.
Currency FX Forecast for Next Week
|Currency pair||Spot||1-week forecast||1-month forecast|