What to expect from the main currency pairs in the New Year
All these currencies, primarily the dollar and the euro, are more or less correlated with the main macroeconomic indicators and political events, which is a drawback from the point of view of fans of technical analysis and, conversely, an advantage, according to apologists, of fundamental analysis. In the first case, only one post on the US President’s Twitter breaks through the most powerful support / resistance zones, reverses channels and trends, drives indicators crazy and turns the Elliot waves into small splashes. In the second, macroeconomic statistics allow, without racking their brains over graphical figures and candlestick analysis, to give fairly accurate long-term forecasts. For example, for the next 12 months.
So, what, according to experts, awaits us in the coming year?
Deutsche Bank, Goldman Sachs, Bank of New York Mellon
Analysts at Deutsche Bank, Goldman Sachs, Bank of New York Mellon and a number of other banks have reached consensus, predicting the fall of the US dollar in 2020. The main reason for this will be a slowdown in global economic growth, which will increase the demand for riskier assets. Moreover, the US Federal Reserve, in anticipation of the presidential election, under pressure from Donald Trump, with a high degree of probability, will continue to lower interest rates or, at least, keep them at the existing level.
The Financial Times writes that, according to Citigroup experts, the Fed’s quantitative easing (QE) policy and cheap dollar liquidity in the market could be a catalyst for the depreciation of the dollar. We agree with colleagues from Citigroup and analysts at the Swiss bank Lombard Odier, as well as one of the largest investment companies in the world, BlackRock, who expect a moderate decline in the dollar in the next six months.
JPMorgan Chase specialists at the end of 2020. forecast for the pair EUR / USD level of 1.14. Goldman Sachs and Bank of America Merrill Lynch call 1.15. And in the German Deutsche Bank and the French Societe Generale, the forecasts for the dollar are even more gloomy – they believe that in a year the euro will trade at 1.20 dollars.
As Bloomberg calculated, the consensus forecast of the largest market operators suggests that by the end of 2020 the US dollar will “lose weight” by another 400-500 points, and the EUR / USD pair will rise to the area of 1.16.
Proponents of the conspiracy theory, of course, will suspect market manipulation and talk about the fact that bankers want to buy up dollar liquidity at the lowest prices, which is why they spread “bearish” forecasts. And here it is appropriate to recall the words of Andreas Koenig, head of Global FX at the multinational investment company Amundi Asset Management, that he had heard many times before about the fall of the dollar against the euro, and every time everything happened the other way around. “I would be very surprised if this consensus came true,” he said.
“Indeed, the Fed’s interest rate of 1.75% is small,” says John Gordon, a leading analyst at NordFX brokerage, “but with other regulators it is generally zero or negative. Despite lower rates, trade wars and other problems, starting in February 2018, the dollar rose more than 10% against the euro. And if you look at the results of the past year, it is clear that for many investors, in view of the weakness of the European economy and problems with Brexit, it was the dollar that became the refuge currency. And for Central Banks, it still remains the main reserve currency, far ahead of any other assets. ”
As for other currencies, Goldman Sachs predicts that the exchange rate of the British pound to the dollar by the end of 2020. will reach 1.37.
GBP / USD will grow too
The Bank of America Merrill Lynch also believes that not only the euro, but, above all, the pound should benefit from resolving uncertainty with Brexit, as a result of which the GBP / USD pair will rise to the 1.39 horizon. A falling dollar will also support emerging markets, strengthening the currencies of countries belonging to the Association of Southeast Asian Nations (ASEAN), while quotes of the pair USD / JPY will drop to 103 yen per dollar.
Canadian and New Zealand dollars will continue to attract interest, and the price of gold will go up.
A leap year 2020 is 12 months, 366 days, and a lot can happen during these days, which can refute any forecasts. The dollar will depend on the internal situation in the United States and on what is happening in global markets, not only in America, but also in Europe and Asia. “I think that a full-scale US deal with China will change the rules of the game … It will change everything!” Predicts David Bloom, global strategist at HSBC FX.
Will it change? Waiting for an answer to this question is not long left. In the meantime: patience, good luck and fulfillment of the most cherished desires!
Happy New Year, 2020!
Warning: These materials are not a recommendation for investment or guidance on working in the financial markets and are for informational purposes only. Trading in financial markets is risky and can lead to a complete loss of deposited funds.