USD FX forecast: The dollar will gain defensive support at times and weaker confidence in the US outlook is liable to push the dollar weaker overall, especially with a lack of yield support.
EUR FX forecast: The Euro will continue to struggle to make much headway unless there is a stronger and unified Euro-zone political stance.
GBP FX forecast: Sterling will be hampered by trade friction and expectations of further Bank of England bond buying with further initial currency losses likely.
JPY FX forecast: The yen is unlikely to weaken significantly in the short term, especially with none of the other major currencies attractive from Japan’s perspective.
US-China relations remain in focus
Underlying tensions between the US Administration and China will continue to be an important market focus during the week and have a crucial impact on market sentiment.
A further deterioration in relations would undermine risk appetite and weaken global equity markets. In these circumstances, the dollar would be likely to gain an element of defensive demand.
Markets wary over renewed increase in coronavirus infection rates
Markets will continue to monitor coronavirus exit strategies during the week. The developments in countries which have already eased restrictions will also be important. A fresh increase in the number of cases and reproduction rate would further undermine confidence in the global growth outlook and weaken risk appetite.
Central banks still under pressure to do more
Markets will be watching rhetoric from central banks closely to assess whether there is likely to be even more aggressive policies, especially in the area of buying government bonds.
In this environment, precious metals are likely to gain further support.
US Dollar foreign exchange prediction
The PMI business confidence data is due for release on Thursday as well as the Philadelphia Fed manufacturing survey. US confidence will remain fragile after the record slide in April retail sales.
The dollar will tend to lose ground if the data is slightly stronger than expected with reduced defensive demand.
Principal attention will again be on monetary policy with Federal Reserve Chair Powell due to testify to Congress during the week. Powell, together with Treasury Secretary Mnuchin, is scheduled to appear before the Senate Banking Committee on Tuesday.
Markets will be looking for further comments on the potential for negative interest rates and additional support for the economy.
Sterling foreign exchange prediction
The UK will also release the latest PMI business confidence data with expectations of a limited recovery from the very weak data released last month.
The labour-market data is due on Tuesday with the latest inflation data on Wednesday and retail sales scheduled for Friday.
Comments from the Bank of England will be watched closely during the week with Governor Bailey due to testify to the Treasury Select Committee on Wednesday. Markets will be looking for further evidence on the potential for negative interest rates and additional bond buying by the central bank after suggestions that it is preparing to take further action.
Developments in the UK/EU trade negotiations will be watched closely during the week after another round of negotiations last week failed to make headway. There will be strong pressure for political movement on both sides with time running out. Sterling will be vulnerable to selling if there is no progress.
Euro foreign exchange prediction
The Euro-zone business confidence data will be released on Friday following market holidays on Thursday. Comments from the ECB will be important during the week. Overall confidence in the Euro-zone and Euro is liable to remain weak.
International FX forecast influences
The Swiss National Bank will be a potentially important focus as it may let the franc strengthen further which will trigger further global uncertainty and FX market turbulence.
Currency FX Forecast for Next Week
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