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Market predictions and forex forecasts for the week of 18 July 2022.
Week starting 18-07-2022
We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.
- The US Dollar’s rally has finally run out of steam, with the currency weakening against 12 of the top 19 currencies we monitor. The major downside movements were against the Swedish Krona SEK (-1.62%) and the Mexican Peso (MXN) (-1.35%), whilst the largest upside movements were against the Brazilian Real (BRL) (0.62%) and the Japanese Yen (JPY) (0.59%).
- US inflation hit another multi-decade high, with the year-on-year data for June coming in at 9.1%. This caused the USD to strengthen last week because the market expects the Fed to shock with a 100 basis-point (bps) rate hike at its next meeting. When the US retail sales data was released on Friday, it was a positive data point, but as profits were taken, the market retreated and the USD weakened.
- This week, there will be minimal data from the US, so the focus will be on the rhetoric by Fed members regarding the possibility of a 100 bps rate hike.
- The European market remains unsure where to go after a wild week of trading with the USD/EUR breaking parity for the first time in over two decades. The EUR ended the week strengthening against 12 of the top 19 currencies, strengthening most notably against BRL (1.63%) and the JPY (1.26%) and weakening most significantly against the SEK (-1.14%) and the MXN (-0.79%).
- There was minimal data from Europe last week, with the major movements coming from the US inflation data.
- This week will be major for the EUR. On Tuesday, inflation is expected to hit another multi-decade high. This will be followed by the European Central Bank’s (ECB) interest rate decision, which will be released on Thursday, where the ECB is expected to raise rates for the first time since the mid-2000s. This should result in EUR strength, although it might already be priced in.
- The British Pound has retreated while the market awaits some certainty after the exit of Boris Johnson. The currency lost ground against nine of the top 19 currencies we monitor, with the most notable declines against the SEK (-1.63%) and the MXN (-1.29%), whilst the largest gains were against the JPY (0.64%) and the Indian Rupee (INR) (0.58%).
- The focus from the UK last week was the political crisis unfolding in parliament. Aside from that, there was generally positive data from the UK.
- This week, the UK inflation data will be released on Wednesday and is expected to follow global trend and set another multi-decade high. Additionally, the UK retail sales data will be released on Friday and is expected to drop. With the concurrent rise of prices, the drop in retail sales is not positive for the economy.
- After the South African Rand took a complete beating the previous week, the currency was quite volatile last week, with large movements both up and down. The Rand ended the week in a moderately good position, strengthening against 12 of the top 19 currencies we monitor. The largest gains were against the JPY (1.11%) and the INR (1.05%), whilst the most impactful losses were against the SEK (-1.09%) and the MXN (-0.67%).
- Last week, there was some disappointing retail sales data, with a -1% drop month-on-month. Otherwise, the ZAR was mostly moved by global factors last week.
- This week, South African inflation data will be released on Wednesday, followed by the interest rate decision by the South African Reserve Bank (SARB) on Thursday. It is expected to hike rates by 50 bps, but if it surprises markets with a 75 bps hike, the ZAR should strengthen.
- The Australian Dollar had a phenomenal week, with the currency gaining ground against 17 of the top 19 pairs we monitor. The losses were against the SEK (-0.60%) and the MXN (-0.29%), whilst the most notable gains were against the JPY (1.74%) and the INR (1.50%).
- There was minimal significant data from Australia last week, with the main event being a drop in unemployment as well as decreased consumer inflation expectations.
- This week, the Reserve Bank of Australia’s meeting minutes will be released on Tuesday, which should give us some indication as to how the central bank expects the market to move going forward.
- The New Zealand Dollar had a great week as well, with the currency strengthening against 15 of the top 19 currencies we monitor. The most notable gains were against the JPY (1.61%) and the BRL (1.55%), with the most substantial losses against the SEK (-0.87%) and MXN (-0.53%).
- Last week, the Reserve Bank of New Zealand raised rates by 50 bps to 2.5%, in line with market expectations.
- This week, inflation data will be released on Monday and is expected to follow global trends and increase.
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