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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 12 September 2022.

Weekly market report for the week ahead

Week starting 12-09-2022

 
 

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

 

USD

  • Last week, the US Dollar dropped from its peak. The USD hit multi-decade highs against many of the major currencies, including a high against the GBP not experienced since 1985, so it was expected to dip eventually. The USD weakened against 15 of the top 19 currencies we monitor. The most notable losses were against the Swiss Franc (CHF) (-2.03%) and the Polish Złoty (PLN) (-2.04%), whilst the largest gains were against the Japanese Yen (JPY) (1.85%) and the South Korean Won (KRW) (1.16%).

  • There was minimal data from the US last week as it was a shortened trading week due to the Labour Day holiday in the US on Monday.

  • This week’s main event is the US inflation data for August which will be released on Tuesday and will be closely watched. As we have all become acutely aware of, inflation is a global issue and is on the forefront of policy makers’ minds when making decisions relating to intertest rates. For this reason, we will be very focused on this data print. If inflation moderates, this will indicate the plan by the US Fed to rein in the surging cost of living might be filtering through to actual prices. Then, the US PPI data for August will be released on Wednesday. This is also expected to slow down. PPI, as we have mentioned before, is a leading indicator of inflation, thus the drop in PPI would be good for the economy. The major data points end off with retail sales for August, which will be released on Thursday. Retail sales are expected to remain stable with no growth or decline. Overall, we look to see if the USD regains its footing and how the data prints will affect the currency.

EUR

  • The Euro had a rebound from its lows after the European Central Bank (ECB) signalled a much more hawkish pivot in its policy stance. The EUR strengthened against 16 of the top 19 currencies we monitor. The most notable gains were against the JPY (3.39%) and the ZAR (2.39%), whilst the most impactful losses were against the PLN (-0.58%) and the CHF (-0.51%).
  • The rally in the EUR was fuelled by the largest rate hike in the ECB’s history, as it hiked rates by 75 basis points (bps) on Thursday. Although expected, the market took this as a commitment by the ECB to remain hawkish and saw this as a sign that there could be future rate hikes. Additionally, there seems to be some form of respite in energy prices and storage for the Euro area, as EU leaders work on multiple plans to curb the massive increase in energy prices since Russia’s invasion of Ukraine began.
  • This week, the only major event is the EU inflation data for August, which will be released on Friday. The market anticipates a higher inflation print, largely because of higher energy prices. This higher inflation print would add weight to the argument of a more hawkish ECB in the coming months.

GBP

  • The British Pound has remained relatively well afloat, with the currency strengthening against 15 of the top 19 currencies we monitor. The most notable gains were against the JPY (2.67%) and the KRW (1.73%), whilst the largest downside movements were against the PLN (-1.30%) and the CHF (-1.24%).
  • It was a very sombre week in the UK as The Queen died at the age of 96. There was minimal UK data, and the GBP maintained its momentum with plans by the new Prime Minister, Truss, to support the purchasing power of the UK consumer with an energy price cap.
  • This week, the UK GDP data will be released on Monday, which is expected to improve as the GDP declined over the previous month. Additional inflation data will be released on Wednesday, which will be closely watched, as it is a major concern for the Bank of England (BoE). There was supposed to be a BoE interest rate decision this week, but it has been delayed due to the mourning period for the passing of The Queen. This BoE meeting will now be held next week (the week of 19 September).

ZAR

  • Another week on the back foot for the South African Rand, as the ZAR weakened against 15 of the top 19 currencies we monitor. The most notable declines were against the PLN (-3.23%) and the CHF (-2.84%), whist the largest gains were against the JPY (0.95%) and the Chinese Yuan (CNY) (0.33%).
  • Last week, the ZAR fluctuated heavily, as the market flipped to-and-fro on global sentiment. The main local event was the quarter-on-quarter GDP growth for Q2. The GDP figure was negative, lining the country up to slip into a technical recession if growth does not recover soon. This, in part, moved the ZAR weaker, but the weakening was damped slightly as the selloff in the USD led to a rotation into the ZAR.
  • This week, there will be no significant data from South Africa, and we will look mostly to inflation prints from the major economies to influence the ZAR’s moves this week.

AUD

  • The Australian Dollar had a mixed performance, strengthening against 11 of the top 19 currencies we monitor. The most notable gains were against the JPY (2.44%) and the KRW (1.41%), whist the greatest downside movements were against the PLN (-1.55%) and the CHF (-1.50%).
  • The Reserve Bank of Australia (RBA) hiked interest rates by 50 bps on Tuesday. This was largely expected and had a “buy the rumour, sell the fact” effect, with the AUD weakening after the announcement. Quarter-on-quarter GDP growth for Australia remained positive for Q2, which bodes well for the economy. This could be part of the reason the AUD strengthened slightly as the week came to an end.
  • This week, there is minimal important data from Australia besides the unemployment rate which will be released on Thursday. We expect the AUD to be largely influenced by global CPI data as well as news of further lockdowns in China, one of Australia’s major trading partners.

NZD

  • The New Zealand Dollar also had a mixed performance, weakening against 11 of the top 19 currencies we monitor. The greatest declines were against the PLN (-1.90%) and the CHF (-1.86%), whilst the largest gains were against the JPY (2.05%) and the KRW (1.07%).
  • There was no significant data from New Zealand, so the currency was mostly influenced by global factors.
  • This week, the quarter-on-quarter GDP growth rate for Q2 will be released on Thursday. This is expected to buck the global trend and rise substantially. Any deviation from this could result in some major volatility in the NZD.

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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