High volatility will continue
Currency market volatility may subside slightly from extreme levels, especially if financial-market instability fears remain lower, but there will still be substantial moves during the week. In particular the adjustment of positions by Japanese funds at the end of the first quarter is likely to have a big impact.
Coronavirus developments will continue to dominate
Global coronavirus developments will inevitably dominate during the week as markets attempt to chart the path of the outbreak across major economies. The US will be a key short-term focus as the number of cases continues to escalate. Europe will also be crucial, especially as governments in France, Italy and Spain will be expecting evidence that the death toll is starting to ease as lockdown measures introduced earlier in March start to have an effect in curbing cases and deaths. If this does not happen, panic is liable to increase.
Central bank action will ease slightly
Actions by global central banks will continue to be important, although the impact is liable to be less dramatic as all major banks have already taken aggressive action in the form of interest rate cuts and bond purchases.
Government actions will remain crucial
The actions of governments will remain extremely important across multiple fronts. As well as economic support packages, markets will be monitoring the evolution of internal travel and social restrictions. Markets will also be monitoring updated economic forecasts on recession and budget deficits from major investment banks.
Data releases will be important during the week. The ISM manufacturing business confidence data is due on Wednesday with the non-manufacturing data released on Friday. Consumer confidence data is due on Tuesday.
Jobs data will also be important with the ADP private-sector release on Wednesday and monthly employment report on Friday. Expectations are for a decline in non-farm payrolls for the month, although the data will not include the most recent job losses as the cut-off date was March 14th. The weekly jobless claims data will also be very important on Thursday with another very high number expected.
The UK will release final PMI business confidence data for March. The difference between the flash data and final data will give an indication of how mush sentiment deteriorated as more restrictive policies came into force.
The number of coronavirus-related deaths is, however, likely to be the most important indicator for Sterling confidence during the week.
The latest Euro-zone data releases are unlikely to have a major impact, although German unemployment will be a significant marker.
Fiscal policy will be important with Euro sentiment boosted if there is a consensus to boost government spending and bond issuance aggressively.
The China official PMI business confidence data is due for release on Tuesday. This data will be important following the slump seen last month. The Caixin PMI data is also due on Wednesday.
There is scope for a limited improvement in the Chinese data from dismal readings last month as domestic production and retail sales start to recover. The extent of the improvement will be important in gauging an underlying internal recovery profile and will also have important global implications.
Currency FX Forecast for Next Week
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