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October Currency Report

 

RIF FX Currency Forecast

 

 

The BOE has remained firmly on the fence throughout the Brexit negotiations, favouring a policy highly contingent on whether we secure a deal. This guidance has been thrown to the wayside as BOE policymaker Michael Saunders, stated that the Bank of England will consider cutting rates, even if we avoid a no-deal. Saunders’ comment caught FX and Bond markets off guard as he is widely considered a Hawk, favouring higher rates to contain inflation. Markets are now pricing a 60% chance of an interest rate cut by middle of next year.

Many analysts now predict a Brexit extension until January, allowing for a General Election and subsequent negotiation period. Although the knee jerk reactions cannot be discounted, until we have substantive progress on Brexit, it’s likely the Pound will remain locked in a tight trading range.

 

 

Despite the ongoing Trade War with China, escalation of Impeachment proceedings against President Trump, and fears of a US slowdown, the USD has remained largely unfazed. This no doubt attributed to the USD status as a ‘Safe Haven’ currency.

Looking forward, the FED is expected to again sound the alarm by cutting rates at their October meeting; FED Futures are currently pricing a 64.7% chance of a rate cut. This expectation precipitated by the dismal September ISM Manufacturing reading which was 47.8 versus an expected 50.2. This figure the worst since June 2009, stoking fears that a US recession is on the horizon.

 

 

Growth in the Eurozone continues to be lacklustre, and much to the disappointment of the ECB, any resurgence of inflation has been short lived and indifferent. Tone of ECB officials changed markedly during September, from cautious, to ‘’prepared to act’’. This change in tone has precipitated the Euro fall of roughly 2% against most major currencies and if the ECB shift from their wait and see mode to firing more QE into the economy then it’s conceivable we may see even further depreciation.

 

 

Wednesday 16th October

UK CPI m/m
US Retail sales m/m

 

Thursday 17th October

EU Summit
UK Retail Sales m/m

 

Thursday 24th October

Eurozone Flash Services
ECB Interest Rate

 

Wednesday 30th October

US Interest Rate

 


Currency Forecast

 

GBPUSD (Spot, 3m, 6m, 12m+)

Analyst expectations remain largely aligned that GBP will remain subdued for the next quarter before increasing into Q2 and Q3 2020.

 

 

EURUSD (Spot, 3m, 6m, 12m+)

USD stronghold over the Euro is projected to weaken from Q2 2020 and then quicken throughout the year.

 

 

GBPEUR (Spot, 3m, 6m, 12m+)

GBPEUR remains a divided subject as the divergence of expectations highlight.
Interestingly the consensus forecast is for a 1.11 – 1.13 range. Unless a Brexit breakthrough materialises and 1.15 could be a target

 

 

Disclaimer: The currency forecast is a composition of leading banks and financial institutions. They do not represent a prediction from RIF FX and nor an inducement to trade.

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