Forex Market Forecast for June 2023

June, which starts on Thursday, kicks off with European inflation and unemployment data as well as US ISM Manufacturing PMI data later in the day, while the US will post its unemployment data alongside non-farm payrolls on Friday. Given the macroeconomic uncertainty during May, the US dollar made substantial gains against most of the other major currencies, and at the moment, the current outlook suggests the greenback’s strength can continue into June.

• The European Central Bank (ECB) has warned that a policy shift by the Bank of Japan (BoJ) could test the resilience of global bond markets.
• The Bank of England (BoE) is expected to continue its rate hikes in order to combat consistently sticky inflation, although it dipped in the latest reading.
• Strong US economic data has put a potential Federal Reserve pause on rate hikes in doubt, and investors now believe rates may stay higher for longer.
• In Australia, inflation accelerated faster than expected in April, up to 6.8%, putting pressure on the central bank to raise rates at the next meeting.

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US Dollar

The US dollar performed strongly against the other major pairs during May, and given the current economic uncertainty, we believe that strength will continue into June. In April and the beginning of May, things started to look up, but with inflation causing ongoing concerns, making a case for further rate hikes stronger, uncertainty has once again crept back into the market, causing investors to flock to the safety of the US dollar. We see the uncertainty remaining, especially in the first part of June, which will result in a little more strength in the USD.

Key Levels

• EURUSD: Higher – 1.1060, Lower – 1.0540
• GBPUSD: Higher -1.2640, Lower – 1.2275
• USDJPY: Higher – 144.90, Lower – 137.30

Euro

The euro had a mixed month, declining against the GBP, CHF, and USD and rising against the other major currencies. Given recent inflation prints from countries around the Eurozone and its biggest economy Germany dropping into a recession, the downside in the euro, especially against the GBP and USD, certainly looks like it could continue in June.

Key Levels

• EURUSD: Higher – 1.1060, Lower – 1.0540
• EURGBP: Higher – 0.8727, Lower – 0.8500

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British Pound

While it still declined vs. the US dollar in May, the GBP was a little more resilient than some of the other currencies. Some analysts, including us, predict further upside in the pound as inflation remains the key theme, pushing rates higher, despite the BoE seemingly wanting to pause as soon as possible due to economic worries. As mentioned last month, the UK economy has remained somewhat resilient, and the GBPUSD hit our 1.26 target and more before pulling back. However, we see the price continuing higher, although the flight to the safety of the US dollar due to uncertainty remains a constant risk.

Key Levels

• EURGBP: Higher – 0.8727, Lower – 0.8500
• GBPUSD: Higher -1.2640, Lower – 1.2275

Japanese Yen

The rumours of a BoJ policy shift continue, and recent comments from BoJ Governor Kazuo Ueda hinting that the era of low global interest rates may be over suggest those rumours could come to fruition. If the BoJ were to shift gears, then expect the Japanese yen to fly. However, there is no guarantee it will or will not happen, so taking either side is a considerable risk. In May, the currency was weak against most other majors. For now, we maintain a neutral stance on the JPY.

Key Levels

• USDJPY: Higher – 144.87, Lower – 137.60
• EURJPY: Higher – 150.90, Lower – 146.80

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