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Market predictions and forex forecasts for the week of 29 November 2021.
Week starting 29-11-2021
- There was a hard move to safe haven assets this past week, which led to USD appreciation against most of its G20 peers. Weakness was seen against only five of the top 20, the most notable being the Japanese Yen (JPY) (-1.56%) and the Swiss Franc (CHF) (-0.75%). The most notable strength was seen against the Turkish Lira (TRY) (11.11%) and the Mexican Peso (MXN) (3.82%).
- Over the last shortened trading week, we had one major event: The Fed chair Jerome Powell remaining at the helm of the US Federal Reserve Bank. This was a big risk factor for the markets and the possibility of policy changes at the Fed had kept the market on edge. Apart from that, we had some slightly disappointing data from the US. The USD brushed aside the dangers from risky assets and powered ahead.
- Coming up this week, we have some big employment data from the US, with the ADP employment change on Wednesday, which is expected to increase. We then have the US nonfarm payrolls data on Friday, which is also expected to increase. Overall, it seems the US labour market is rebounding from the pandemic. However, with the possibility of fourth wave of infections, it should be monitored closely.
- Despite new waves of Covid sweeping Europe, the EUR strengthened against 18 of the top 20 currencies, notably against the TRY (11.37%) and MXN (4.21%). The Euro weakened against the JPY (-1.07%) and CHF (-0.31%).
- Last week’s data came in on par to slightly worse than expected throughout the EU. With a resurgence of Covid in Europe, many would expect the Euro to weaken. However, the EUR weakened quite a bit over the past few weeks and it was about time for it to show a bit of resilience.
- Data wise, we have EU inflation out this week, with expectations of a slight increase on the cards. If this is positive in the developed countries, it could be EUR positive. Furthermore, we have retail sales on Friday and an increase here could also be EUR positive.
- The sterling saw mixed moves over the past week, with weakness against nine of the top 20 currencies. As investors moved funds to the safe haven currencies such as the JPY and the USD, the most notable weaknesses were seen against the JPY (-1.98%) and the CHF (-1.24%), whereas the Pound strengthened against the TRY (9.94%) and the MXN (3.30%).
- Not much data came out of the UK. The data that came in was mostly on par with expectations. With improved sentiment, rate hikes from the Bank of England (BOE) seem more likely.
- Coming up this week, we wait to see how the market reacts to the new Covid variant. The UK has controversially put South Africa back on the red list, barring travel to the country. On the data side of things, we don’t have much happening. Future cues will be taken from external factors.
- The Rand saw some significant movements over the past week with the discovery of the Omicron variant of COVID-19. Although spread throughout the world and only discovered in South Africa, the markets decided the ZAR was in the perfect position to sell and we saw some big losses on the local front. The ZAR weakened against 18 of the top 20 currencies, with the most significant being against the JPY (-3.24%) and the CNY (-2.99%), whilst strength was seen against the TRY (9.55%) and the MXN (1.98%).
- There has not been much in terms of South African data. One event worth noting was the increase in the producer price index, a leading indicator of inflation. This could be seen as an indicator of interest rate hikes.
- After an extremely disappointing week of performance from the ZAR, the country has not been put into another hard lockdown, as feared by many. This is ZAR positive, but the risks remain to the upside with currency weakness a major concern. The main data point to look out for is the South African unemployment rate on Tuesday. This is expected to increase yet again to 35.6% of the population. The main concern over the next week will be progresses regarding the new variant, which could move the market.
- Aussie weakness was seen against 15 of the T20 currencies. The most notable weaknesses were against the JPY (-2.65%) and the CHF (-1.97%). The AUD strengthened against the TRY (10.15%) and the MXN (2.48%).
- Retail sales and company profits increased in Australia, which was better than expected. This positive news did not stand any chance against the contagion effects of the Omicron variant of COVID-19. Australia is known for its hard lockdowns and this new variant could result in another.
- This week, we have some important data coming out regarding GDP growth. With quarter-on-quarter growth expected to contract by 2.7%, this should be AUD negative.
- NZD weakened against all but two of the T20 currencies this week and only strengthened against the usual suspects: the TRY (9.4%) and the MXN (1.78%). The most notable weakness was against the JPY (-3.24%) and the Chinese Yuan (CNY) (-2.54%).
- The Reserve Bank of New Zealand raised interest rates on Wednesday by 25 basis points, up from 0.5% to 0.75%. According to classical economic theory, the NZD should have strengthened, but similarly with the AUD, fears regarding the Omicron variant have put the NZD on the back foot.
- The data coming out of New Zealand will be minimal and the major moves will be determined by global factors.
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