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Market predictions and forex forecasts for the week of 7 March 2022.

weekly market watch 11 January 2021

Week starting 07-03-2022

 

USD

  • The Dollar continues to strengthen this week as geopolitical news carries more weight than normal. The escalation of hostile conditions in Ukraine resulted in risk-averse trading and institutional trading flocking to safe haven currencies, such as the Dollar. Concerns that the US could impose sanctions on Russian oil production also likely helped push the USD higher as oil hit $125 per barrel Monday morning.

  • US Fed chair, Jerome Powell, said that he would be inclined to propose and support a rate hike at the Fed’s March meeting. These comments led to increased bets on the USD and the currency rose higher alongside the nonfarm payroll figures release on Friday.

  • This week, we expect a widening of the US trade deficit for January. This could push the USD down on Tuesday. A negative prediction to January’s JOLTS job openings figures on Wednesday could result in the USD’s dip should it print as forecast. Given last week’s surprise nonfarm payrolls figures, however, a jump to the JOLTS figures could boost the USD.

EUR

  • Last week, the EUR fell to 0.824 against the GBP, the lowest level in over three years, and 1.09 against the USD. While high inflation is still the main driver of the EUR weakness, this has been exacerbated by sanctions against Russia, leading to higher commodity prices. The most significant of which is the oil price.
  • Oil prices have skyrocketed since sanctions were imposed on Russia, one of the largest producers of crude in the world, thus dampening supply. At the same time, wheat prices have also increased significantly due to supply disruptions from Ukraine, one of the largest producers of this commodity in Europe.
  • These contributed even more to the already high inflation and will complicate the European Central Bank’s monetary policy decision making in the next few months.

GBP

  • The sterling weakened against seven of its 10 main trading partners over the past five trading days. The GBP weakened significantly against both the AUD and the NZD by 3.16% and 3.45% respectively. The Pound also lost its footing against its USD counterpart, slipping by 1.34% and ending the week at 1.3225.
  • Coming up this week, we have the release of the UK’s GDP growth rate in January. GDP is expected to come in at 0.3% (MoM), after the 0.2% retraction in December.
  • Balance of trade figures for January and manufacturing and industrial production data are also scheduled for release this week.

ZAR

  • The ZAR continued to strengthen this week amid stronger than usual commodities prices. The local currency broke past 20.22 against the GBP on Friday, the strongest it’s been since November 2021. The Rand then displayed significant volatility against the greenback but broke the 16.70 mark against the EUR, which the Rand has not done since March 2021.
  • The market’s ‘risk off’ sentiment has not impacted the ZAR as much, however, volatility has picked up significantly due to this, and it is tied to the swings in the commodities markets.
  • In terms of South African data, the manufacturing PMI increased to 58.6, indicating an expansion of economic activity, albeit incremental, and an increase in new vehicle sales to 44,200. This could be indicating that the SA economy is still in recovery from the coronavirus slump. What would be more important is the GDP figures, which will be released on Tuesday.

AUD

  • Last week, the AUD continued along its upward trajectory, rising above a one-year high against major developed currencies as tensions in Ukraine continue to mount. GBP/AUD declined by 3.16% during the week, falling towards 1.7940 from an open of 1.8533. The EUR/AUD pair followed a similar path, decreasing by 4.82% before closing the week at 1.4820. The AUD has now strengthened against both the GBP and the EUR on every day of trade since 21 February. Furthermore, the AUD made additional gains against the USD, even during significant USD strength and risk-off investing. The AUD gained 1.85% against the greenback during weekly trade, with the USD/AUD pair moving down from 1.3920 to 1.3565.
  • The Reserve Bank of Australia’s (RBA’s) most recent interest rate decision, along with updated GDP growth rate figures released last week. The RBA chose to hold their cash rate at the ultra-low level of 0.1%, whilst simultaneously reporting GDP numbers that exceeded analyst forecasts. GDP for Q4 came in at 4.2% (YoY).
  • This week, the February NAB Business Confidence Index is due for release. The Westpac Consumer Confidence Index is also due to release figures for March.

NZD

  • With rising commodity prices strengthening the New Zealand Dollar, the NZD/USD rate continues to edge its way towards 0.7 NZD/USD. Over the past five trading days the NZD has strengthened against all its main trading partners besides the Australian Dollar.
  • On Thursday, we can expect the release of the Business NZ Performance of Manufacturing Index pertaining to February. The index fell to 52.1 in January and an index score of 51 is forecast for February.
  • This week, we can expect the New Zealand Dollar to continue its tug of war between soaring commodity prices adding value to the NZD and global risk sentiment moving towards the greenback as a safe haven.

If you would like further information on the market along with personalised hedging strategies for you or your business, you can get in touch with our team at fxhedging@sableinternational.com.

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