GBP/USD Forecast: British Pound to Offer Value Underneath

2020 on Forex: the new forecasts

The coronavirus has changed everything. When analysts gave forecasts for 2020 at the end of last year, no one could foresee that the whole world would be seized by the pandemic. Call it a “black swan” or not, it’s necessary to re-evaluate the situation and adjust the medium- and the long-term outlook. Below you will find the analysis of the main Forex drivers and the overview of the prospects for the key commodities.

US recession

In 2019, economists had some fears of a potential US recession. Well, they were right not only about the USA, but also about the whole world as lockdowns pushed every country to the deep downturn. Now it’s clear that earlier the view was naturally more optimistic. How encouraging the US unemployment rate and NFP were at the end of 2019! We couldn’t imagine at that time that more than 33 million Americans would lose jobs and economic activity would fall to unprecedented lows. The Fed made a dire scenario for the prolonged US recession. All the needed measures have been taken, almost 3 trillion dollars were provided to support the market and additional aids are expected. Anyway, the US dollar gains as a safe-haven currency. The collapse of USD this year remains highly unlikely.

Central banks’ monetary policy

In December, we expected the Federal Reserve to be patient in its monetary policy decisions. At the same time, we didn’t underestimate the power of rate cuts due to recession fears. Coronavirus outbreak flipped the script with the Federal Reserve unveiling outstanding measures to support the suffering economy. The first rate cut from 1.5-1.75% to 1-1.25% happened at the beginning of March and was followed by an even bigger rate cut to the range of 0-0.25% just after a week. At the same time, the regulator announced an unlimited buying of mortgage-backed securities and plans to buy corporate bonds and bonds backed by consumer debt. Moreover, the Fed Chair Jerome Powell didn’t exclude the possibility of negative interest rates. Even though our forecasts were not 100% accurate, the upside for the USD has been indeed limited. As for the stock market, after a shock wave caused by Covid-19, the ultra-loose monetary policy pushed the indices up.
Other major central banks also joined the easing game. The Reserve banks of Australia and New Zealand cut their interest rate to unprecedented lows of 0.25%. The Bank of England and the Bank of Canada lowered their interest rate as well to 0.1% and 0.25% respectively. As for the European Central bank, it keeps the zero interest rate on hold. The supportive tool the ECB presented is the 750 billion euro Pandemic Emergency Purchase Programme (PEPP) aimed to counter the serious risks to the outlook of the Eurozone.
As all major central banks conduct almost similar easing policy, the Forex pairs can fluctuate within certain levels for a long period. That is actually a good news for range-bound traders, as channels are expected to remain quite strong.
ECB
The European Central Bank let the market know that it was aiming to do whatever it takes to save the euro area from the coronavirus damage. However, trouble always brings his brother: Germany was so tired to be the sponsor of the unlimited bond-purchasing ECB program that the German court claimed that it actually violated constitution. Now, the ECB has three months to explain that purchases were "proportionate". The ECB credibility is under threat as Germany may pull out of the next ECB's bond purchases. This situation has made euro quite volatile.

Brexit

Boris Johnson hasn’t kept his promise “to get Brexit done” yet. However, we can forgive him for that as this year brings much worse problems to deal with. Now, when countries are getting over the coronavirus shock, the UK and EU should hold the last round of trade talks and finalize an agreement by the end of December. Some analysts are skeptical about that. They think the deadline could be extended beyond the end of December, leaving the UK subject to tariffs on most goods. This would be devastating for the British pound. The sooner the UK and EU make a deal, the better for GBP.

Oil

Oil prices spent last year between $50 and $70. December was positive with the US and China ceasing fire in the trade war and OPEC extending production cuts. Possibility of a scenario where prices drop to 0 and below was absolutely inconceivable even for the most pessimistic observers, and yet it came true. It marked the beginning of 2020 with historically unseen turbulence, even apart from the coronavirus hit.
In the long term, however, there are all fundamentals for oil prices to get back to where they were. However, that may not happen this year. Observers predict that oil prices will recover to the levels of $55-60 if there is nothing in the way during the year. Otherwise, $30 is seen as the safest baseline level for the commodity during 2020.

Stocks

Just like in 2019, the stock market had a nightmarish beginning of 2020. S&P lost 35%, with some stocks losing more than 50% of value. As the summer season is coming, the market sees 50% of the losses recovered in most sectors. While the shape of recovery is being discussed, most analysts agree that after the worst-performing Q2, the S&P will continue restoring its value.
Notice that the situation is different for different stocks. Locked by the anti-virus restrictions, most of the world population was forced to spend weeks and months at home facing their TVs, laptops, and desktops. That made strong Internet-related companies blossom, so we saw Amazon and Netflix rise to even higher value than before the virus. On the contrary, the healthcare sector struggling to invent the vaccine saw Moderna, BionTech, Inovio, and other new and old pharma companies surge to unexpected heights.
IT and Internet communications companies will likely gain much more attention during the year.
Google, Nvidia, Disney, Apple, and many more around the IT and Internet sectors have the full potential to spearhead the S&P in 2020 and further on.
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Why isnt the dollar tanking, and why is gold crashing? It makes no sense.

This is the best tl;dr I could make, original reduced by 73%. (I'm a bot)
The premium for liquidity combined with rates plunging across major central banks did not bode well for anti-fiat gold prices.
A price war triggered by Saudi Arabia plunged oil prices in their largest drop since 1991.The risk of volatility remains high with all eyes on stimulus measures from governments and central banks.
Speculation for lower US interest rates may curb the recent pullback in the price of gold as the Federal Reserve is widely expected to deliver another rate cut in March.
US Dollar Forecast: Fed Boosts Liquidity, Expected to Slash Rates Again Next Week.The 'V-shaped' recovery in the US dollar continues despite the Fed announcing a massive USD1.5 trillion liquidity pump on Thursday to arrest a further breakdown in the financial system.
British Pound Forecast: GBP/USD Tumbles in Worst Week Since 2009.The British Pound fell the most since 2009 versus the US Dollar last week, prolonging downside breakouts in GBP/USD and GBP/JPY as EUGBP soared.
US Dollar Technical Analysis: Can USD Add to Explosive Rise?The US Dollar roared higher last week, posting its best performance since October 2008 at the heart of the global financial crisis.
Summary Source | FAQ | Feedback | Top keywords: price#1 Week#2 Dollar#3 since#4 rate#5
Post found in /Economics and /ForexResources.
NOTICE: This thread is for discussing the submission topic. Please do not discuss the concept of the autotldr bot here.
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💥FRIDAY MARKET FORECAST💥

💥FRIDAY MARKET FORECAST💥

TopAsiaFX - FRIDAY MARKET FORECAST
💥FRIDAY MARKET FORECAST💥
𝐌𝐨𝐭𝐢𝐯𝐞: Preparing for Nonfarm Payrolls
🔰 #EURUSD and #GBPUSD consolidate losses ahead of the release of the US Nonfarm Payroll report.
🔰 #USDJPY pair pressures the 110.00 figure as equities continued to advance.
🔰 The OPEC+ proposed a 600,000 bpd oil output cut will start immediately and continue until June if agreed by all members.
🔰 #Gold prices advanced for a second consecutive day but remain in the red for the week, amid persistent demand for high-yielding assets.
🔰 #AUDUSD easing ahead of Lowe, RBA Minutes.
#forex #market #news #forecast #currency #eur #usd #jpy #aud #gbp#oil #fxmedia topasiafx.com
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Your AM Global Stocks Preview and a whole lot more news that you need to read: Global stocks are dropping following economic contraction in two of the world’s largest economies

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An analysis of the Japanese Yen, and key drivers of currency.

I've been seeing interesting moves in the macroeconomic markets, especially when it comes to Japan. They're a fun case study, read up on abenomics, their NIRP, aging population, etc...there's a deep rabbit hole you can get in when it comes to global markets.
I've heard people bitching about the currency market not making sense after Japan adopts NIRP yet the Yen is appreciating. Boo fucking hoo. Interest rates aren't the only driver of currency. In order to understand what's going on with the Yen, you should be paying attention to a few things:
a. monetary policy: typically higher interest rates means currency appreciation. More printing means depreciation.
b. trade balance: more demand (i.e. increasing positive net exports) means currency appreciation. Japanese net exports have been on a sharp rise since 2014 shifting from a net negative to net positive exporter.
c. GDP: there a positive correlation between rising GDP and currency appreciation. As aggregate demand goes up, currencies rise. If you know anything about economics, I just said the same thing twice. Japanese GDP has seen many ups and downs since the mid-90s amid growing global GDP, but generally flat.
d. debt: this really comes into play when a country is neck deep in shit and defaults on their bonds. Not a huge influence for developed countries IMO. It should be pointed out that Japan has a very high debt-to-gdp ratio. Holy fuck batman 229%?
e. other countries: what's happening with inflation? Let's take the U.S. for example. The fed believes that gradual rate hikes will be prudent. This, as we know, should cause the USD to appreciate, holding all else equal. One effect rising interest rates creates is that it will result in higher inflation. Now, this is where I get to the relationship between inflation and currency. If international inflation is high relative to domestic inflation, this will have an appreciating influence on domestic interest exchange rates. Among other factors, this is because goods in Japan are cheaper relative to goods in the USA. If the USA and Japan were the only two countries in the world, if the US is creating a rise in inflation, and Japan is creating a drop in inflation , this means, holding everything equal, the Yen appreciates. While simplistic, it helps illustrate a very complex relationship. There are many countries in the world, with different rates of inflation. I think a lot of countries can be treated as "noise" when trading pairs or inferring moves in equity markets from implications in the forex market. Key currencies are the USD, Yen, EUR, GBP, China, etc. When I model currencies, I look at the size of an economy as well. So inflation in the USA and China (which are both rising) will have a greater influence than in South Africa, for example.
So how do you YOLO this shit?
First of all, I'm not going to tell you what to buy or sell. That's up to you. But consider this. Knowing what you know now, before making a trade decision, think to yourself: how do moves in the ForEx market influence equities, bonds, etc.? What do you think Abe will do next? What about the rest of the world? What are the big banks and market makers doing? Here's a chart of the USD/YEN with some key fib levels at a Q311 low to a Q116 high. Once you formulate a good hypothesis go ahead and smash that buy/sell button.
Oh, and one more thing...
Go fuck yourselves.
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Your PM US Stocks and a whole lot more news that you need to read: US stocks close lower, pare earlier losses on Brexit progress

US Markets End of Day Snapshot


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EUR/USD and GBP/USD Forecast February 7, 2020

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