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Market predictions and forex forecasts for the week of 1 August 2022.
Week starting 01-08-2022
We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.
- Last week, the US Dollar weakened against all but one of the top 19 currencies we monitor. The data released on Thursday showed a second consecutive quarter of negative growth in the US, putting the nation in a technical recession. The currency gained ground against the Turkish Lira (TRY) (1.03%) whilst the most notable moves to the downside were against the Brazilian Real (BRL) (-5.92%) and the ZAR (-2.25%).
- There was a substantial amount of data from the US last week, with the main event being the US Fed interest rate decision. The Fed did as most anticipated and raised rates by 75 basis points (bps). The USD strengthened after, but this was shortly followed by the US GDP growth data, which showed a second quarter of negative growth, which in classical economics is the definition of a technical recession. The USD was sold off as the markets lowered their expectations of such extreme tightening by the US Fed in future meetings.
- This week, the monthly nonfarm payrolls data will be released. This data has shown solid growth in the jobs market for the past few periods, which is the reason why the Fed has been able to raise rates without the worry of drastically impacting the US job market. The US manufacturing purchasing managers index will be released on Monday and is still expected to remain positive but has seen a drastic decline in the past year as supply chain constraints impact production.
- The Euro had a disappointing performance last week, most likely dragged down by the US recession as well as the retaliatory measures of Russia cutting off most natural gas supplies to Europe. The common currency lost ground against all but two of the top 19 currencies we monitor. The EUR strengthened against the TRY (1.24%) and the USD (0.13%), whilst it weakened most notably against the BRL (-5.78%) and the Norwegian Krone (NOK) (-2.90%).
- Last week, there was another record-breaking inflation print out of the Eurozone, with inflation hitting 8.9% (YoY). This was mainly fueled by higher energy and food costs, which stemmed from the Russian invasion of Ukraine. On a positive note, the quarter-on-quarter GDP growth from the EU increased, which is in stark contrast to the declines in the US.
- This week, the EA unemployment data for June will be released on Monday and is expected to remain stable at around 6.6%. On Wednesday, the retail sales data for June will be released, which could be a volatility-causing event, as it might turn negative, which would not be positive for the EUR.
- The British Pound had quite a good week, seemingly taking solace in the fact that the race to succeed Boris Johnson seems to be down to two candidates, as well as the UK economy appearing to be less impacted than that of its major counterparts. The GBP strengthened against 15 of the top 19 currencies we monitor, with the major losses against the BRL (-4.57%) and the NOK (-1.07%), whilst the most notable gains were against the TRY (2.56%) and the USD (1.47%).
- There was no significant data out of the UK last week. Thus, the moves in the market can mostly be attributed to local political factors, as well as the negative perception of data from the US and EU.
- This week, there is the possibility of big moves in the GBP, with the Bank of England (BoE) interest rate decision on Thursday. Since so many of the global central banks have been tightening policy more drastically than in the UK, the market is looking for the BoE to raise rates by more than its standard 25 bps. If it does raise rates by 50 bps, the GBP could gain ground following the announcement.
- The South African Rand managed to hold on to most of its gains from the previous week, only losing ground against 5 of the top 19 currencies we monitor. The most notable declines were against the BRL (-4.66%) and the NOK (-1.92%), whilst the most significant gains were against the TRY (1.49%) and the EUR (1.29%).
- Last week, there was minimal data from South Africa. One factor to take note of was the producer price index print for June, which came in at 2.1% (MoM) and 16.2% (YoY). This is a leading indicator of the consumer price index, meaning that the country should brace for further increases in inflation, which would burden the already overburdened consumer. In addition, the South African balance of trade for June was released on Friday. It has remained at historically high levels, which has supported the ZAR to some degree.
- This week, there will be no noteworthy data from South Africa, so we will look to global factors for the main movements in the currency.
- The Australian Dollar had a mixed performance last week, with the currency strengthening against 11 of the top 19 currencies we monitor. The most notable losses were against the BRL (-4.96%) and the NOK (-1.59%), whist the largest gains were against the TRY (2.09%) and the USD (0.84%).
- Australian inflation increased slightly less than anticipated, hitting 6.1% (YoY). This is in line with global trends and will probably result in the Reserve Bank of Australia (RBA) having to raise interest rates at its next meeting.
- This week, the main event is the RBA interest rate decision on Tuesday, where it is expected to hike rates by 50 bps. This should support the AUD, and in the event of a 75-bps rise, the Australian Dollar could rally.
- The New Zealand Dollar had a disappointing trading week, with the currency weakening against 11 of the top 19 currencies we monitor. The most notable declines were against the BRL (-5.30%) and the NOK (-1.96%), whilst the most impactful gains were against the TRY (1.72%) and the USD (0.91%).
- The most notable data event last week was the ANZ business confidence index for July. This has hit its thirteenth consecutive month of negative readings and does not look positive for New Zealand businesses.
- This week, the main event is the New Zealand unemployment data for Q2 and it is expected to remain at a solid 3.1%, which is positive for the currency.
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