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Market predictions and forex forecasts for the week of 28 February 2022.

Weekly market report for the week ahead

Week starting 28-02-2022

 

USD

  • Due to Russia’s invasion of Ukraine, traders have moved to safe haven currencies. As a result, the USD has strengthened against 14 of its top 20 trading pairs. Not surprisingly, the largest gains were against the Russian Ruble (RUB) (8.24%) and the Polish Złoty PLN (2.52%), and the largest losses were against the Norwegian Krone (NOK) (-1.83%) and AUD (-0.88%).

  • Experts are questioning the pace and magnitude of rate hikes due to the far-reaching effects of the war in Ukraine. The drastic increase in oil prices and the effects on supply chains will have widespread effects on the consumer. The Fed will have to keep a very steady balance between cooling down the rampant inflation and not stifling the economy with overzealous rate hikes. Data from the US has been mostly overlooked. The main event was the GDP growth figures for Q4, which came in as expected at 7%.

  • Coming up this week, the State of the Union Speech by US President Biden will be presented on Tuesday. This will influence the market and should be closely watched. For more conventional data, we have the US nonfarm payrolls data on Friday. The market consensus is that this should be increasing, which would be USD positive. The situation in Ukraine should be at the top of everyone’s minds as it is a global market moving, extremely fluid and volatile event.

EUR

  • Not surprisingly the EUR has had a bad week, with funds flowing out of the currency to safe havens further away from the conflict. The EUR weakened against 15 of its top 20 trading pairs, with the major weakness against the NOK (-2.19%) and the NZD (-1.33%) while the EUR strengthened against the RUB (7.68%) and the PLN (2.06%).
  • The past week in the Eurozone has been dominated by the conflict in Ukraine, and the only data that was released was the year-on-year inflation for January, which came in at 5.1%, as expected.
  • Coming up this week, the anticipated inflation for February will be released. In addition, we will have to monitor how the conflict will affect the economies of all European states.

GBP

  • The sterling has seen a massive drop in value due to the unfolding war and the potential effects it will have on the economy and its major trading partners. The GBP has weakened against 18 of the top 20 currencies, with the only gains against the RUB (6.72%) and the PLN (1.18%). The largest losses were against the NOK (-3.03%) and the AUD (-2.45%).
  • There was minimal data this past week, thus the currency movements were largely geopolitical. Consumer confidence dropped in the UK, but with the scrapping of many Covid restrictions, this should turn around.
  • The main factor going forward is the situation in Ukraine and how the UK might be affected by this. In one such development, UK-based oil giant, BP, has announced the sale of its 20% stake in the Russian oil company Rosneft.

ZAR

  • With the world’s focus on Europe, South Africa’s budget speech was partially overlooked. The positive tones of this budget might have kept the ZAR afloat as global markets experienced extreme volatility. The ZAR strengthened against 12 of its top 20 trading pairs. The Rand strengthened most notably against the RUB (8.21%) and PLN (2.30%) while weakening against the NOK (-1.93%) and the AUD (-0.95%).
  • The most notable event was, of course, the budget speech – there was nothing outrageous said and planning was generally as expected. This is positive for the SA economy as we have seen many budget speeches catch economists off guard, leading to major volatility.
  • This week, the South African balance of trade releases on Monday. Something to note is that the ramp up in metals prices could be positive for the ZAR, since it is one of the commodity currencies of the world.

AUD

  • The AUD had a stellar week. The general trend suggests that the further away from the war in Ukraine you are, the better you might perform. The AUD strengthened against 18 of the top 20 currency pairs, with the biggest gains against the RUB (9.10%) and the PLN (3.31%), whilst the losses were against the NOK (-1.04%) and the NZD (-0.17%).
  • No important data was released from Australia last week. The rise in metals prices due to the conflict could have assisted the AUD, due to it being a large metal producing economy.
  • There are a few important data releases this week. On Tuesday, the Reserve Bank of Australia’s (RBA) interest rate decision will be released. It’s expected to remain stable, but if it increases, the AUD will strengthen further. On Wednesday, the Q4 GDP growth data will be released. Anything that comes in above expectations would be positive for the currency.

NZD

  • The NZD had an astronomical surge in value over the past week, strengthening against 19 of its top 20 trading pairs. The only weakness was against the NOK (-1.03%). The largest strengthening was against the RUB (9.27%) and the PLN (3.27%).
  • The Reserve Bank of New Zealand (RBNZ) raised interest rates to 1% from 0.75% last week. This was a positive factor for the NZD.
  • This week, global geopolitics will be the main influencing factor for the NZD.

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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