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Market predictions and forex forecasts for the week of 16 January 2023.
Week starting 16-01-2023
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 18 of the top 19 currencies we monitor. The only gain was against the Turkish Lira (TRY) (0.16%), whilst the largest downside movements were against the Japanese Yen (JPY) (-3.22%) and Indian Rupee (INR) (-3.22%).
- Last week, the only major event in the US was the inflation data. This has been highly anticipated as it would signal the direction the US Fed will be heading at its next interest rate decision later this month. The data came out positive in the sense of an easing of inflation, with month-on-month inflation decreasing by -0.1%. This indicates that the Fed’s recent rate hikes have possibly filtered through to the market and cooled the once out-of-control inflation. This further indicates the possibility of the US Fed slowing the pace of rate hikes in the coming months. While this is positive for consumers, it may have a negative impact on the value of the US Dollar.
- This week, the market will be closely watching the release of US retail sales data for December on Wednesday. Retail sales are expected to decline slightly, indicating a possible impact of higher inflation on consumer spending. Additionally, the producer price index data for December, which will also be released on Wednesday, is expected to decline, which would be taken as a positive sign for inflation. Overall, it will be interesting to see how the market reacts to these economic indicators and if there will be a continued selloff of the US Dollar or if investors will "buy the dip."
- Last week, the Euro strengthened against 12 of the top 19 currencies we monitor. The most notable gains were against the TRY (2.09%) and USD (1.77%), whilst the largest moves to the downside were against the JPY (-1.51%) and Brazilian Real (BRL) (-0.82%).
- There was minimal data from the Euro Area last week. However, the warm winter weather is having a positive impact on energy demand due to lower energy consumption in many countries. The ongoing Russian invasion of Ukraine has cut off gas supplies to several European states that rely heavily on that commodity for power generation.
- This week, the market will closely monitor the release of EU inflation data for December on Wednesday. Month-on-month inflation is expected to decline, which would be welcome news for consumers. However, a lower inflation print could potentially lead to a decrease in the value of the Euro, as it could signal that the European Central Bank may lower the pace of future interest rate hikes. Overall, it is important to keep an eye on this data release as it could have a significant impact on the European market.
- Last week, the British Pound weakened against 12 of the top 19 currencies we monitor. The most notable upside movements were against the TRY (1.71%) and USD (1.16%), whilst the largest losses were against the JPY (-2.18%) and INR (-2.06%).
- The market was relatively quiet last week as traders returned from the New Year's break. The only notable data point was an unexpected increase in the month-on-month UK GDP, which was forecasted to contract. Going forward, this could be seen as a positive sign for the UK, as the Bank of England predicted a deep and sustained recession.
- This week, the focus will be on the release of UK inflation data on Wednesday. Inflation is forecast to increase in both month-on-month and year-on-year figures, which is not good news for consumers who are already feeling the pressure of high prices and interest rates. This data release could potentially result in some volatility in the currency market; therefore, it is important for traders to closely monitor the release. The week will end with the release of UK retail sales data on Friday, which is expected to show a slight dip, further indicating that consumers are feeling the pressure of higher prices and interest rates.
- The South African Rand strengthened against 13 of the top 19 currencies we monitor. The most notable gains were against the TRY (1.88%) and USD (1.68%), whilst the largest weaknesses were against the JPY (-1.59%) and INR (-1.51%).
- Last week, the ZAR demonstrated significant resilience in the face of escalating power outages, known as loadshedding, and many people returning to work. The South African Rand (ZAR) gained strength, largely due to its weak starting point at the end of last year and a decline in the value of the US Dollar.
- This week, South African inflation data will be released on Wednesday. It is expected to show a slight increase as the impact of higher energy prices continues to be felt in the economy. The market will be closely watching to see if the ZAR can maintain its gains from the past week, or if market participants decide to take profits from the recent price rally.
- Last week, the Australian Dollar strengthened against 10 of the top 19 currencies we monitor. The most significant increases were against the TRY (1.77 %) and USD (1.41%), whilst the largest moves to the downside were against the JPY (-1.89%) and INR (-1.79%).
- The Australian Dollar (AUD) had a positive week, mainly due to an improved outlook on the global market, specifically with regards to the opening of the Chinese economy and its impact on trade with Australia. Additionally, there was a shift in investor sentiment away from the US Dollar towards other currencies, particularly commodity-linked currencies, like the AUD and the South African Rand.
- This week, the market will be closely monitoring the release of consumer confidence data on Tuesday. The expectation is that the data will show a decline in confidence, which could have an impact on the value of the AUD. It will be important to keep an eye on this data release as it could provide insight into the current state of the Australian economy.
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