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Market predictions and forex forecasts for the week of 14 February 2022.

weekly market predictions for the week ahead

Week starting 14-02-2022

 

USD

  • The USD performed well against the majors and less stellar against the minor currency pairs. Overall, the USD strengthened against 12 of the top 20 currencies, the most notable being against the Swedish Krona (SEK) (2.32%) and the Russian Ruble (RUB) (2.01%). The USD weakened against the ZAR (-1.81%) and the Turkish Lira (TRY) (-0.53%).
  • US inflation has, once again, edged up, hitting a 40-year high. This situation has rattled markets, with traders pricing in up to seven rate hikes this year from the US Fed. The pace of these hikes is unknown, but as soon as they start, our expectation is that the USD will gain further traction.
  • Geopolitics are the talk of the town, with tensions on the border between Russia and Ukraine putting world markets on edge. The US has warned that an attack is imminent, while Russia claims the US is fearmongering. Whatever might transpire, the eyes of the world are set on this flareup and any inkling of violence would be a catalyst for extreme volatility.

EUR

  • The EUR weakened against 15 of the top 20 currencies last week. The largest declines were against the ZAR (-2.79%) and against the TRY (-1.29%), with gains against the SEK (1.46%) and the RUB (1.18%).
  • The drop in the EUR came as European Central Bank (ECB) President Christine Lagarde turned down the hawkish rhetoric regarding rate increases in the Eurozone. Although rate hikes have not been dismissed, Lagarde hinted that this would not happen soon and that it would be communicated appropriately.
  • The main event for this week is the GDP growth data on Tuesday, which is expected to increase and that would be Euro-positive.

GBP

  • The sterling had a great performance against the majors, with the minors holding their ground against the GBP. The Pound strengthened against 14 of the top 20 currencies, the largest upward moves were against the SEK (2.37%) and the RUB (1.98%), while it weakened against the ZAR (-1.87%) and the TRY (-0.40%).
  • Over the past week, the major data event from the UK was the GDP growth rate. GDP growth remained stable at approximately 6.5% YoY. In addition, some criticised the Bank of England for the pace and way it has been communicating its rate hikes.
  • This week, the main data events are the UK unemployment rate on Tuesday and the UK inflation data on Wednesday. The UK unemployment rate is expected to remain stable at 4.1%. The inflation data, which is moderated compared to the rest of the world, is expected to come in at 5.4%. The UK retail sales data will be released and the end of the week and is expected to increase slightly, which is positive for the UK economy.

ZAR

  • The ZAR was one of the best performers last week, strengthening against all the top 20 currencies. The most notable being against the SEK (4.36%) and the RUB (4.13%).
  • The main event from last week was the State of the Nation Address (SONA) by President Cyril Ramaphosa. Overall, there was nothing that shocked markets, which is seen as Rand-positive, and we saw the ZAR appreciate.
  • Coming up, traders are curious if the ZAR can maintain its gains from the last week, especially in the current state of global geopolitics. The emerging markets are usually first to sell off when risks elevate.

AUD

  • A mixed bag of performance from the AUD, weakening against eight of the top 20 currency pairs. The most notable weakening was against the ZAR (-2.18%) and the TRY (-0.58%), while the currency strengthened against the SEK (2.26%) and the RUB (1.69%).
  • There was not that much data from Australia last week. Overall, business confidence has increased and inflation expectations remain stable.
  • Coming up this week, the Australian unemployment data will release, which is expected to remain stable at 4.2%. Due to the lack of any major events, we expect the AUD to take cues from global markets.

NZD

  • The NZD had a similar performance to the AUD, weakening against eight of the top 20 currencies. The most notable weakness was against the ZAR (-2.25%) and the TRY (-0.66%), and the NZD strengthened against the SEK (2.16%) and the Polish Złoty (PLN) (1.05%).
  • The major news event from the past week was increasing inflation in New Zealand, like the rest of the world.
  • Coming up this week, there is minimal data from New Zealand. Like Australia, we expect the currency to be influenced by global markets.

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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