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Market predictions and forex forecasts for the week of 8 August 2022.
Week starting 08-08-2022
We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.
- The US Dollar had a good trading week, with the currency appreciating against 16 of the top 19 currencies we monitor. The most notable gains were against the Japanese Yen (JPY) (2.76%) and the Norwegian Krone (NOK) (1.98%), whilst the largest declines were against the Brazilian Real (BRL) (-0.35%) and the South Korean Won (KRW) (-0.17%).
- The USD started last week on the back foot, with the market backtracking on the idea that the US Fed would keep raising rates, after the country fell into a technical recession. This all changed at the end of the week, when the nonfarm payrolls data was released and showed, much to the surprise of the market, that job growth is still robust, with 528,000 jobs added in July. After this, the USD strengthened drastically, as it paves the way for the US Fed to keep raising rates at its current 75 basis point (bps) trajectory.
- This week, the main event is the US inflation data, which will be released on Wednesday and is expected to remain at multi-decade highs. If it were to decline, it would indicate that the US Fed’s interest rate mechanism could be working to slow down the increasing price spiral. Although, this could not actually be the case, as the prices of oil and gasoline were a major factor in the increased inflation pressures. In recent months, the prices finally started to fall, so this could work through via the inflation print.
- The Eurozone had a mixed performance and the Euro lost value against 11 of the top 19 currencies we monitor. The most notable gains were against the JPY (2.02%) and the NOK (0.77%), whilst the largest declines were against the KRW (-1.07%) and the Chinese Yuan (CNY) (-0.88%).
- There was minimal European data last week, with the EUR being swayed by geopolitical factors and the incredible rally in the USD on Friday.
- With little European data again this week, external factors will be the main influencer of the EUR’s behaviour.
- The British Pound had a horrible trading week and declined against all but two of the top 19 currencies we monitor. The two gains were against the NOK (0.06%) and the JPY (1.30%), whilst the most significant losses were against the BRL (-1.91%) and the USD (-1.41%).
- Last week, the UK Bank of England (BoE) raised interest rates by 50 bps, the largest increase since the mid-90s. While this was already priced in, the main catalyst for the fall in value of the GBP were the comments by BoE Governor Bailey, who stated that the UK will head into a recession by Q4, which will last for more than a year.
- This week’s main event is the UK GDP data for Q2, which will be released on Friday. We expect the first decline in the GDP growth rate, which would be in line with the BoE estimates.
- The South African Rand broke its positive streak, losing value against all but two of the currencies we monitor. The only currencies the Rand strengthened against were the JPY (1.19%) and the NOK (0.18%), whilst the Rand weakened most notably against the BRL (-1.85%) and the CNY (-1.74%).
- There was no important data from South Africa last week and the currency was swayed by global factors.
- There will be minimal data again this week and global factors will influence the local currency.
- The Australian Dollar had a mixed performance last week, with the currency weakening against 12 of the top 19 currencies we monitor. The most notable losses were against the BRL (-1.85%) and the CNY (-1.71%), whilst the largest gains were against the JPY (1.61%) and the NZD (0.30%).
- The Australin interest rate decision was released last week, and the Reserve Bank of Australia (RBA) raised interest rates by 50 bps. This was anticipated and it was a case of “buy the rumour, sell the fact” with the currency appreciating before the decision, then weakening after. This, with the backdrop of globally declining growth, weighed on the AUD.
- This week, the focus is the RBA statement on monetary policy. The RBA will be giving the market an indication of its future interest rate expectations and advising how it will be proceeding with its rate-hiking cycle and its work to combat inflation, whilst still maintaining growth locally.
- The New Zealand Dollar had a disappointing week, with the currency depreciating against 15 of the top 19 currencies we monitor. The most notable losses were against the BRL (-1.73%) and the KRW (-1.61), whilst the most impactful gains were against the JPY (1.34%) and the NOK (0.08%).
- The only noteworthy data point last week was the unemployment rate, which increased slightly, but not too drastically.
- There will be no significant data from New Zealand this week, so we expect global factors to influence the currency.
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