At look at how major currency pairs could perform this Friday.

USD: More dollar weakness ahead

We're arguing that 2021 will the year the FX market gets back on track after years of diversions from President Trump's protectionism policies and the Covid-19 crisis. We're forecasting a broad-based dollar weakness, by 5-10% against most currencies. There are two things central to that bearish dollar call. First, that policymakers provide sufficient fiscal and monetary policy support such that inflation expectations rise. Second, the Fed keeps policy rates on the floor such that US real interest rates stay very negative.

This very loose US monetary setting, plus a reversal of the White House's protectionist policies, should allow currencies in the Rest of the World to breathe again. We are bullish on EUR/USD targeting 1.25 – largely due to weak USD characteristics, rather than due to projected strong EUR dynamics. This should allow European FX to flourish vs the dollar – NOK and SEK in the G10 space and CZK in the CEE space in particular. The return back on track characterised by reduced volatility and behind the curve Fed should favour carry such as TRY and RUB. We also believe that with Chinese authorities embracing a stronger CNY since July, the market liberalisation measures should allow USD/CNY to reach 6.30 next year. Overall, USD is to further fade in 2021

EUR: Investors eye the December EU Summit as the resolution point.

Despite no progress made on the issue of the EU budget, the Recovery fund and the rule of a law clause in the virtual call of EU leaders yesterday, the effect on EUR has been limited as such an outcome did not come as a surprise. Investors eye the December EU Summit as the resolution point. We are inclined to think a common solution will be eventually found (in line with the prior examples of EU disputes) taking away the hurdle for more EUR/USD upside in 2021 during the wider soft USD environment.

GBP: Scope for upside, but a limited upside vs the euro

EUR/GBP continues to tread water given no material announcement on the UK-EU trade negotiations. After the initial one-off positive adjustment to GBP in response to the deal, we expect EUR/GBP to plateau around 0.88 in 2021 given (a) the uninspiring UK economic prospects; (b) no normalisation from the Bank of England; (c) no material EUR/GBP mis-valuation. Given our bullish EUR/USD, we prefer GBP/USD

TRY: Brighter days ahead

The Central Bank of Turkey delivered yesterday and hiked the repo rate by 475bp. We think the shift in the CBT stance towards the tighter policy (which in our view is to stay for months ahead) should bring back stability and lead to further lira gains as its risk premium gets compressed further. The currency now benefits from superior nominal and real rates, while the improving current account position envisaged for 2021 should also help. We expect USD/TRY to dip to 7.20.

Read the original analysis: FX daily: Back on track

Content disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more here: https://think.ing.com/content-disclaimer/

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

AUD/USD: Upbeat China PMIs favor bulls near fresh three month high around 0.7400

AUD/USD remains positive after China’s activity data for November flashed welcome signs. November’s China NBS Manufacturing PMI, Aussie TD Securities Inflation flashed more than expected results. Market mood stays cautious optimistic amid vaccine hopes, Brexit jitters and Aussie-China tussle.

AUD/USD News

EUR/USD: Refreshes three-month high towards 1.2000, battles triangle resistance

EUR/USD eases from fresh high since September 01. The pair rose to the highest in three months before a few hours but couldn’t cross the upper line of a five-week-old ascending triangle formation. RSI conditions warrant caution, bears are less likely to take entries above 1.1870.

EUR/USD News

NZD/USD refreshes 2.5-year high on strong China PMI above 0.7400

NZD/USD rises to the fresh high since June 2018 after China data. China’s NBS Manufacturing PMI, Non-Manufacturing PMI beat market forecasts in November. ANZ Business Confidence, Activity Outlook also came in positive for November.

NZD/USD News

Gold: Vaccine hopes weigh on XAU/USD below $1,800

Gold fades late-Friday’s recovery moves from $1,774. The yellow metal fades the bounce off the early-July top, marked on Friday. Risk tone remains positive amid vaccine hopes, mixed clues over Brexit deal.

Gold news

Black Friday 2020 Discounts!

Learn to trade with the best! Don't miss the most experienced traders and speakers in FXStreet Premium webinars. Also if you are a Premium member you can get real-time FXS Signals and receive daily market analysis with the best forex insights!

More info

Forex Majors

Cryptocurrencies

Signatures