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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

 

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Market predictions and forex forecasts for the week of 16 May 2022.

Weekly market assessment for the week ahead

Week starting 16-05-2022

 
 

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

 

USD

  • The Dollar’s strength continued as the currency strengthened against 15 of the top 19 currency pairs. The most notable gains were against the Norwegian Krone (NOK) (3.55%) and the Turkish Lira (TRY) (3.55%), whilst the most substantial losses were against the Japanese Yen (JPY) (-0.96%) and Canadian Dollar (CAD) (-0.47%).

  • The market was incredibly turbulent last week, especially regarding currencies and stocks. It all came to a head when the US inflation data print was 0.3% MoM instead of the expected figure of 0.2%. This put the market on shaky feet as the slowdown in inflation due to the higher Fed interest rate was anticipated. Additionally, this move sent stock markets crashing down, but they mostly recovered quickly after the fact, as “buy the dip” investors moved in.

  • This week, the US retail sales data will be released on Tuesday and is expected to increase month-on-month, which would be positive for US economic growth. Otherwise, there is no significant US data. Analysts will continue to monitor to see if the USD can maintain its hold on the top spot amongst the major currencies. The prospect of continued Fed tightening and a general “risk-off” tone in the markets have put some solid backing behind the USD.

EUR

  • The Euro had a disappointing week, with losses against 14 of the top 19 currency pairs. The Euro strengthened against the TRY (2.16%) and NOK (0.75%), whilst weakening against the Swedish Krona (SEK) (-2.24%) and JPY (-2.23%).
  • There was minimal data from the Eurozone last week. The region remained focused on the Ukrainian conflict and the fear in the EU of natural gas being used as an economic weapon by the Russian government. There was some talk from the ECB that it would consider raising interest rates as early as July. We recommend that you monitor the growth and inflation closely as this could change.
  • This week, the GDP growth and inflation data will be released. Both are expected to increase year-on-year but decrease quarter-on-quarter. Short-term inflation could be moderating, which is the main concern for the EU right now, but if growth also stalls, this would be EUR negative.

GBP

  • The Pound seems to have recovered from its terrible first week in May. Last week, the GBP strengthened against 12 of top 19 currency pairs. The largest gains were against the TRY (2.86%) and NOK (2.27%), whilst the largest losses were against the JPY (-1.52%) and Brazilian Real (BRL) (-1.10%).
  • A notable event was the absence of the Queen from the opening of parliament and the annual “Queens Speech”. Although not a market moving event, the health of the Queen should be noted, as this would have an impact on the UK economy in some way. The UK retail sales data was also released last week, which came in lower than anticipated – indicating no rebound in consumer spending. On Thursday, the GDP growth data was released, showing that the economy is still growing, but we should remember that this is measured against the economy one year ago, when lockdowns were still enforced to some degree.
  • This week, the UK unemployment data will be released and is expected to remain stable at 3.8%. The more pressing data point, inflation, will be released on Wednesday. Inflation is expected to increase to new extremes, with a level of 9.1% YoY under the consensus of economists. We end the week off with the confirmed retail sales data, which is expected to point to a downturn in the market.

ZAR

  • The dramatic fall in the South African Rand has finally stalled. The ZAR strengthened against 10 of the top 19 currencies. The Rand strengthened the most against TRY (3.46%) and NOK (2.92%), whilst it weakened most notably against the JPY (-2.01%) and BRL (-1.70%).
  • There was minimal important data from South Africa and the ZAR has mostly been influenced by the global drop in metals prices – particularly, gold. Additionally, the “risk-off” tone of global investors has taken its toll on the ZAR, with the currency having lost over 9% of its value against the USD over the past month.
  • This week, we have two major events: South African inflation data and the SARB interest rate decision. The inflation data will be released on Wednesday and is expected to increase, like most global economies. The SARB interest rate decision will take place on Thursday and a 50bps increase is expected, in line with the US rate hikes. We will look to see what transpires and how the market reacts to it.

AUD

  • The Australian Dollar had a terrible week and weakened against 17 of the top 19 currency trading pairs. The gains were against TRY (1.54%) and NOK (0.71%), and the worst losses were against JPY (-1.94%) and BRL (-2.50%).
  • The most important data from Australia was the retail sales figures for March, which came in, as anticipated, at 1.6%. The decline in the gold price as well as the continuation of lockdowns in China have contributed to trade and supply chain issues in Australia.
  • Coming up, the Australian elections will be the main contributing factor to volatility in the AUD. There is no other noteworthy data, so all eyes will be on the elections on Saturday.

NZD

  • The New Zealand Dollar also had a disappointing week, weakening against 16 of the top 19 currency trading pairs. The NZD had the largest gains against the TRY (1.62%) and NOK (1.00%), with its largest losses were against the JPY (-2.72%) and Mexican Peso (MXN) (-2.03%).
  • Last week, New Zealand’s food inflation figure came in at 6.4% YoY, which is in line with global trends. As for a more interesting data point, year-on-year visitor arrivals to New Zealand in March increased by a staggering 517%.
  • This week, the main event is the budget speech on Thursday. Although we don’t expect any surprises there, it remains a risk factor to take note of.

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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