Benefits of subscribing

Currencies included: USD, EUR, GBP, ZAR, AUD and NZD

 

Data releases and relevant current affairs for the week

Currency movement forecasts, market analysis and expected data release results

Important events and predicted effects on currencies

 

Read all our Weekly Market Watch reports

 

Market predictions and forex forecasts for the week of 15 August 2022.

Weekly market report for the week ahead

Week starting 15-08-2022

 
 

We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.

 

USD

  • The US Dollar had a dismal week, losing ground against all but three of the top 19 currencies we monitor. The most notable declines were against the ZAR (-3.41%) and the NZD (-3.37%), with meager gains against the Indian Rupee (INR) (0.23%) and the Swedish Krona (SEK) (0.14%).

  • This weakening in the USD came after the first indication that peak inflation might have been reached, with the year-on-year inflation figures finally coming down as month-on-month inflation came in at 0%, from a level of 1.3% for the previous month. Improving inflation lowered the market’s expectation that the US Federal Reserve will be hiking interest rates as aggressively as it has been in the past two meetings, and so the USD was sold off. Although this is the current view in the market, one should be cautious, as this drop in inflation is largely due to the drop in energy prices, which are notoriously volatile and subject to massive movements. Therefore, this drop in inflation could be reversed if we see an uptick in oil prices. The downward move in the USD was exacerbated by the July month-on-month producer price index (PPI) data, which showed a decline, the first since the peak of the Covid pandemic. PPI is a leading indicator of inflation, so this could translate to lower prices for US consumers in the future.

  • This week, we will monitor if the weakness in the USD will hold after the massive move last week. For US data, we will focus on July’s month-on-month retail sales data on Wednesday. It is expected to remain positive, but not show any substantial growth (which is what the US Fed would like to see) as major spending is a problem, but so is a contraction. The US FOMC meeting minutes will also be released on Wednesday. This will give us some insight into what the US Fed sees on the horizon and how it plans to deal with the worry of high inflation and an overheating US economy.

EUR

  • The Euro had a mixed performance, with the currency weakening against 12 of the top 19 currencies we monitor. The most notable losses were against the NZD (-2.72%) and the ZAR (-2.61%), while the most significant gains were against the SEK (1.20%) and the INR (1.12%).
  • There was no significant data from the Eurozone last week. The market was mostly moved by the US inflation data and the concern about growth in the EU with the supply of Russian gas being cut drastically. With winter coming up in the EU, their stockpiles of natural gas are low, which means there could be some serious strain on the economy.
  • This week, the EU GDP data will be released on Wednesday, which is expected to remain positive on a quarter-on-quarter basis, which is good for the EUR. If the data comes in lower than expected or shows a contraction in quarter-on-quarter GDP, we can expect the market to take that negatively. This is followed by EU inflation data which will be released on Thursday. We expect inflation to decline, thanks to lower oil prices, although the higher cost of electricity in the EU might dampen these effects.

GBP

  • The British Pound had a bad week, weakening against 13 of the top 19 currencies we monitor. The sharpest declines were against the ZAR (-2.87%) and the NZD (-2.87%), whilst the largest gains were against the INR (0.78%) and the SEK (0.73%).
  • The moves in the sterling were mostly muted throughout the week, with a slow decline in value, but it was exacerbated with the release of quarter-on-quarter GDP growth data on Friday. This figure was negative, which was expected as predicted by the Bank of England (BoE). If its forecasts remain true, there will be another five quarters of negative growth, although that might be a bit overstated.
  • On Wednesday, we look to see if the UK inflation rate drops from its peak, following the US print last week. This could weaken the GBP further, as it might indicate that the BoE could lower the intensity of its interest rate hikes in the foreseeable future, especially with the negative growth print last week. The UK retail sales data for July will be released on Friday, which is expected to be negative overall, as consumers are cutting back. The economy might contract even further because of this.

ZAR

  • The South African Rand had a stellar week, with the currency appreciating against all the currencies we monitor. The most notable gains were against the SEK (4.02%) and the INR (3.83%).
  • The moves in the ZAR can be fully attributed to the improving inflation picture from the US, which led to a more “risk-on” move in the market. This, together with the negative growth from the UK, has pushed the institutional money to higher-risk markets such as the ZAR. This heightened risk tolerance was mirrored in US stocks as well.
  • We will monitor if the Rand can hold on to the gains from the past week, as when it moves so drastically, it tends to give back a bit of the ground it made. South African retail sales data will be released on Wednesday, which is expected to decline as high fuel prices and rising interest rates impact consumer spending.

AUD

  • The Australian Dollar ended the last week solidly in the green, with losses against only two of the top 19 currencies we monitor. The losses were against the NZD (-0.74%) and the ZAR (-0.50%), whilst the most notable gains were against the SEK (3.53%) and the INR (3.42%).
  • The AUD was a part of the crowd that benefited from the risk-on tone in the markets. Consumer confidence remained under pressure, hitting another low the past month, but consumer inflation expectations rose slightly, which is good as it sets the tone for salary negotiations, which ultimately lead back into the inflation picture.
  • This week, the Reserve Bank of Australia’s meeting minutes will be released on Tuesday. This should give us an indication of its plans relating to interest rate hikes and curtailing inflation in Australia. Apart from that data point, we will monitor if the AUD remains at elevated levels, as the current move in the currency has been quite pronounced.

NZD

  • The New Zealand Dollar had a phenomenal week, with the currency appreciating against all but one of the top 19 we monitor. The only loss was against the ZAR (-0.09%), whilst the most significant gains were against the INR (3.78%) and the SEK (3.62%).
  • There was minimal data from New Zealand last week and the NZD was propped up by improving global risk sentiment.
  • The main event this week is the Reserve Bank of New Zealand’s interest rate decision. It is expected to follow global central bank trends by raising interest rates by 50 basis points to 3%. Any deviation from this would result in some astounding volatility in the currency.

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.

Interested in keeping up with the market watch? Subscribe now for weekly updates

* indicates required

We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you'll do so with the backing of experienced local experts.