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

 

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Market predictions and forex forecasts for the week of 7 February 2022.

weekly market watch 11 January 2021

Week starting 07-02-2022

 

USD

  • The Dollar saw one of its worst weeks in years, weakening against 12 of the top 20 currencies. The most drastic was against the Polish Zloty (PLN) (-2.36%) and the Russian Ruble (RUB) (-2.12%). The gains were seen against the Turkish Lira (TRY) (1.71%) and the Brazilian Real (BRL) (0.43%).

  • The drop in the USD came as central banks around the world ramped up their hawkish rhetoric, with even the EU warming up to the possibility of raising rates. The US were the first to mention they will be raising rates, but they have not taken the steps to do so yet. On the positive side of things, the US unemployment rate fell to 3.9% and nonfarm payrolls data surprised on the upside with 467,000 jobs added in January.

  • Coming up this week, we have the US inflation data on Thursday. This is expected to increase once again, putting more pressure on the Fed to raise interest rates in the near term.

EUR

  • A stellar performance from the Euro last week, with the possibility of an interest rate rise in the Eurozone pushing the EUR up. We saw the Euro strengthen against 17 of the top 20 currencies, the most notable being against the TRY (3.51%) and the Japanese Yen (JPY) (1.98%), while the weakness was seen against the PLN (-0.65%) and the Swedish Krona (SEK) (-0.21%).
  • Major strength in the Euro was seen after the European Central Bank (ECB) shocked economists by opening the conversation about the possibility of raising interest rates in the EU. This will be the first time since 2012 that they will actually raise interest rates, making this a major event.
  • The top thing to watch for in the coming week is tensions on the Ukrainian border, with a standoff between Ukrainian and Russian forces. Although a diplomatic solution is being sought, there is always the possibility of some escalation.

GBP

  • Generally positive market movements from the Pound, with strength against 14 of the top 20 currencies. Weakness was seen against the PLN (-1.74%) and the SEK (-1.25%), while strength was seen against the TRY (2.42%) and the Indonesian Rupiah (IDR) (1.06%).
  • The past week we saw a short-lived uptick in the Pound, after the Bank of England raised interest rates from 0.25% to 0.5%. Although this was partially expected, the actual announcement did result in some GBP strength.
  • Coming up this week, the main focus will be on the growth data from the UK. It’s expected to be positive, and any deviation from this will result in pressure on the GBP.

ZAR

  • A tragic performance from the Rand over the past week, with weakness seen against 17 of the top 20 currencies. The weaknesses were seen against the PLN (-2.59%) and the SEK (-2.14%) whilst the strength was seen against the TRY (1.47%) and the Chinese Yuan (CNY) (0.4%).
  • The poor performance from the ZAR was in part due to the renewed load shedding that kicked off in the country this week. This was the first for the year and had not been anticipated by the market. In addition to that, we have the major central banks ramping up interest rate hiking rhetoric globally. This always results in money flowing from developing economies to more developed safe-haven economies.
  • Coming up this week, the major event will be the State of the Nation address by President Cyril Ramaphosa on Thursday. Apart from that, the market will take cues from global events.

AUD

  • A mixed performance from the Australian Dollar (AUD), with weakness seen against eight of the top 20 currencies. The most notable weakness was seen against the PLN (-1.97%) and the SEK (-1.51%), with strength seen against the TRY (2.13%) and the IDR (0.80%).
  • The AUD had a general weakening trend over the past few weeks. This was not helped by the Reserve Bank of Australia (RBA) keeping interest rates stable at 0.1%.
  • Coming up this week we have AU retail sales data, which is expected to drop — this is not AUD positive. The Australasian markets have been rather quiet with the Chinese Lunar New Year holiday taking liquidity out of the markets. Now that they are back, we expect the markets to be quicker to react to global events.

NZD

  • There was a positive tone on the New Zealand Dollar (NZD) side of things, weakening only against four of the top 20 currencies. The weakness was seen against the PLN (-1.52%) and the SEK (-1.10%), while the strength was seen against the TRY (2.6%) and the JPY (1.01%).
  • Not much on the New Zealand data front, with the major event from the past week being the New Zealand unemployment rate, which decreased from 3.4% to 3.2%.
  • Coming up this week, there is not much to look out for. The only data point is the New Zealand Business confidence PMI for January coming out on Friday.

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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