Next Week’s FX Forecast & Events Mar 23, 2020

High volatility will continue

Currency market volatility will remain extremely high in the short term. As coronavirus developments continue, there will be substantial capital flows, especially with funds facing pressure to raise cash. 

There will be further important liquidity issues within markets which will contribute to the volatility. The actions by central banks will help alleviate a dollar shortage in global markets. If there is a sustained easing of pressure, the dollar should lose ground, but if the measures prove to be ineffective, the US currency will tend to gain further ground.

Coronavirus developments will continue to dominate

Global coronavirus developments will continue to be the principal market focus in the short term. There will be some data releases which will start to show the impact of coronavirus on European and US economies. The number of cases in Italy and spread across Spain will be an important focus during the week. US developments may prove to be pivotal for market sentiment during the week. 

Central bank action will be important 

Actions by global central banks will remain important, although there is little fresh action that can be taken on interest rates given that they have been cut to near zero in all major economies. 

Government actions even more crucial

The actions of governments are likely to be even more important for sentiment with pressure for further measures to support demand and supply conditions. In particular, markets will be monitoring fiscal developments in The US and Euro-zone. 

US

Federal Reserve policy Business confidence data will be significant with the PMI readings due on Tuesday.

The latest jobless claims release will be watched very closely on Thursday. Layoffs in the economy will increase sharply and the jobless claims figure is liable to show a big jump with consensus forecasts for a figure of around 750,000 from 281,000 last week. 

UK

The flash reports for March business confidence are due for release on Tuesday and will provide some evidence on the early impact of coronavirus disruption to the domestic economy.

Inflation data is due for release on Wednesday, but is unlikely to have a significant impact with retail sales data due on Thursday.

The Bank of England will still hold its scheduled policy meeting on March 26th even though the bank announced emergency measures last week including a cut in interest rates to record lows. There is still the possibility that further measures will be announced. 

Euro-zone

The latest Euro-zone PMI data releases are also scheduled for Tuesday with expectations of a sharp downturn for the month, although there is a wide range of forecasts. 

ECB actions will continue to be monitored closely.

International

Developments within the Chinese economy will remain significant in the short term as the economy attempts to recover.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.068 1.050 1.120
USD/JPY 110.8 110.5 105.0
EUR/GBP 0.919 0.922 0.895
GBP/EUR 1.088 1.085 1.117
GBP/USD 1.162 1.139 1.251
AUD/USD 0.575 0.570 0.610
USD/CAD 1.442 1.450 1.400
USD/SGD 1.452 1.455 1.420
USD/HKD 7.760 7.770 7.790
NZD/USD 0.563 0.560 0.600
GBP/JPY 128.8 125.8 131.4
GBP/AUD 2.021 1.998 2.051
GBP/NZD 2.064 2.034 2.086
GBP/SGD 1.687 1.657 1.777
GBP/HKD 9.018 8.849 9.748
GBP/CHF 1.148 1.150 1.196

Tim Clayton

Tim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including Investing.com and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics.

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