Next Week’s FX Forecast & Events Sep 07, 2020

Foreign Exchange Prediction Highlights

USD FX forecast:  Dollar confidence will remain very fragile and any significant gains will quickly generate fresh selling pressure

EUR FX forecast: The Euro will remain vulnerable to a corrective setback, especially the ECB voices further concerns over the Euro’s level.

GBP FX forecast: Sterling has been boosted by strong global market conditions, but is liable to weaken from current levels, especially with trade tensions set to increase.

JPY FX forecast: The Japanese yen should maintain a firm tone with gains capped by expectations that the Bank of Japan will maintain a very expansionary monetary policy. 

US market holiday on Monday

Trading volumes will be low on Monday with the US Labor day holiday, but volumes will then pick up sharply as the European and Norther America holiday season comes to a close. Currency moves in the week ahead will tend to 

US political trends remain in focus

US politics will continue to be important with the Presidential and Congressional election campaigns intensifying after the Labor Day holiday. The dollar could gain an element of support if opinion polls suggest that President Trump is gaining some traction.

US Dollar foreign exchange prediction

The US employment data was mixed with a slightly lower than expected increase in non-farm payrolls at 1.37mn from 1.73mn the previous month, but the unemployment rate declined to a 5-month low of 8.4% from 10.2%. Overall, there were still reservations whether the economy would sustain the recovery.

The latest producer prices inflation data is due on Thursday with the consumer prices data on Friday. The data was notably above market expectations last month and another strong release would cast doubt on expectations that inflation will remain extremely low.

Federal Reserve officials will not make any comments on interest rates during the week with the blackout period in force ahead of the September policy meeting. There are strong expectations that interest rates will remain extremely low throughout the next few months at least.

The expectations of very low interest rates for a sustained period will continue to sap US currency support.

Sterling foreign exchange prediction

The latest monthly GDP, industrial production and trade data is due on Friday, but political developments and global market moves are liable to dominate. 

Trade rhetoric will be monitored closely with the latest round of negotiations taking place during the week in London. There is likely to be a press conference once the talks are concluded.

The latest evidence suggests that little progress will be made with UK chief negotiator Frost warning that the UK was not afraid to walk out on the talks. Deadlock will tend to undermine Sterling, although the currency has been resilient in the face of trade concerns over the past few weeks

Euro foreign exchange prediction

The ECB will announce its latest policy decision on Thursday. No policy changes are expected at this meeting, but forward guidance will still be an important element.

A particular focus at this meeting will be whether the central bank protests against Euro strength in the press conference from President Lagarde.

Coronavirus developments will be monitored closely with the number of new infections continuing to increase sharply in many Euro-zone countries. Further increases would unsettle the Euro amd fears that the economic recovery will falter. 

International foreign exchange factors

The Bank of Canada will announce its latest policy decision on Wednesday. There will be no updated monetary policy report and no press conference from the Governor at this meeting. Interest rates are expected to be held at 0.25%.

Currency FX Forecast for Next Week

Currency pair Spot  1-week forecast 1-month forecast
EUR/USD 1.184 1.175 1.190
USD/JPY 106.2 106.5 104.2
EUR/GBP 0.892 0.905 0.896
GBP/EUR 1.121 1.105 1.116
GBP/USD 1.327 1.298 1.328
AUD/USD 0.728 0.720 0.722
USD/CAD 1.306 1.315 1.312
USD/SGD 1.364 1.366 1.355
USD/HKD 7.751 7.755 7.760
NZD/USD 0.672 0.665 0.655
GBP/JPY 140.9 138.3 138.4
GBP/AUD 1.823 1.803 1.840
GBP/NZD 1.975 1.952 2.028
GBP/SGD 1.811 1.774 1.800
GBP/HKD 10.29 10.07 10.31
GBP/CHF 1.212 1.196 1.211

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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