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Currencies included: USD, EUR, GBP, ZAR, AUD and NZD

 

Data releases and relevant current affairs for the week

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Market predictions and forex forecasts for the week of 6 December 2021.

Weekly market assessment for the week ahead

Week starting 06-12-2021

 

USD

  • The past week was good for the USD as it strengthened against 12 of the top 20 currencies. The largest positive moves were against the Turkish Lira (TRY) (7.8%) and the AUD (1.77%). The Dollar weakened against the Mexican Peso (MXN) (-2.04%) and the Polish Złoty (PLN) (-1.66%).

  • A main takeaway from the past week was Federal Reserve Bank Chair Jerome Powell saying it’s time to “retire” the idea of transitory inflation and accept it is here to stay. This suggests the Fed is considering an increase to the pace of its tapering of asset purchases. On Friday we saw quite disappointing nonfarm payrolls data, coming in at 210,000, from an expected 550,000. This was counteracted by a lower-than-expected unemployment rate, which came in at 4.2% from an expected 4.5%.

  • This week, we have the US balance of trade on Tuesday. This is expected to contract, which would be USD positive. Inflation rate data is due on Friday and the inflation rate is expected to increase to 4.9% YoY. This is a major factor, so it could result in some hefty swings in the currency.
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EUR

  • This was a positive week for the EUR. The currency strengthened against 12 of its top 20 peers, and the weaknesses were not too drastic. The currency strengthened against the usual suspects, the TRY (7.46%) and the AUD (1.8%), with weakness against the MXN (-2.12%) and PLN (-1.17%).
  • We received EUR inflation on Tuesday, which came in higher than expected, at 4.9% YoY from 4.1% previously. Unemployment data came in, as expected, at 7.3%, so nothing too exciting on that front.
  • The main upcoming event is the EUR GDP data, which is expected to increase by 2.2% QoQ and 3.7% YoY. Any deviation from this would result in volatility in the EUR.

GBP

  • The GBP had a generally mixed performance, weakening against 12 of its top 20 peers. The Pound strengthened against the TRY (7.3%) and the AUD (1.2%) and weakened against the MXN (-2.63%) and PLN (-2.25%).
  • There is not much to discuss on the data front. The past week was dominated by news regarding covid and restrictions on travel. There have been rumours of a possible rate hike from the Bank of England, which would be sterling positive.
  • Coming up, the main factor at play is the UK trade balance data on Friday. In the meantime, one can look to global issues for direction.

ZAR

  • The ZAR came back from a terrible previous week to strengthen against 17 of the top 20 currencies. This is not unexpected given such a drastic weakening over the previous week. The largest positive moves were against the TRY (8.6%) and the NOK (2.43%), and weakness was against the MXN (-1.44%) and the PLN (-1.10%).
  • South Africa’s only notable factor from last week was a slight increase in the unemployment rate. Apart from that, the country is fully experiencing a fourth wave of COVID-19 infections as daily cases are skyrocketing. This should be closely monitored, although it has been mostly priced in already.
  • Coming up this week, we have GDP growth figures on Tuesday. GDP figures are expected to disappoint, with a forecast contraction of 1.8%.

AUD

  • It was an extremely disappointing week for the AUD. The Aussie dollar weakened against 18 of the top 20 currencies. The most drastic weakness was against the MXN (-3.8%) and the PLN (-3.42%) and the strengthening was against the TRY (5.7%) and the Norwegian Krone (NOK) (0.01%).
  • Australia had disappointing data last week. GDP growth contracted quarter-on-quarter by 1.9%. This is understandable as there were lockdowns in multiple Australian cities, but nonetheless it was not a positive figure.
  • Coming up this week, we have the Reserve Bank of Australia’s interest rate decision on Tuesday. The expectation is that rates will be kept stable at 0.1%, but if the Reserve Bank decides to hike rates, we will see the AUD appreciate.

NZD

  • The NZD had a similar performance to the AUD, with weakness against 17 of the top 20 peers. The NZD weakened against the MXN (-3.14%) and the PLN (-2.76%) and strengthened against the TRY (6.42%) and the AUD (0.68%).
  • The only notable event from last week was the business confidence index, which fell even more than expected.
  • There isn’t much upcoming data, thus the markets will generally be moved by global factors.

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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