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Market predictions and forex forecasts for the week of 10 January 2022.

weekly market predictions for the week ahead

Week starting 10-01-2022

 

USD

  • The USD had a mixed performance last week, weakening against 10 of the top 20 currencies. The USD’s most prominent weakness was against the ZAR (-1.28%) and the Polish Złoty (PLN) (1.01%). The Dollar strengthened against the Turkish Lira (TRY) (5.21%) and the Russian Ruble (RUB) (0.9%).
  • There were two major data events last week. The first was the Federal Open Market Committee (FOMC) minutes on Wednesday. The path to tapering was reaffirmed and the market is fully under the impression that the US Fed will be raising rates between three to five times over the next 12 months. On Friday, the US nonfarm payrolls data was released, which came in much lower than expected. The economy added 199,000 jobs rather than the expected 400,000. Furthermore, the US unemployment rate dropped to 3.9% from 4.2%, which indicates the country is basically at full employment.
  • This week, the US inflation data for December will be released. This is expected to top 7% for the first time in 40 years. This will add even more weight to the market’s prediction that the Fed will be raising interest rates to curb inflation. On Friday we have US retail sales data releasing, which is expected to remain unchanged.

EUR

  • The EUR weakened against seven of the top 20 currencies. The most notable weakness was against the ZAR (-0.78%) and the Canadian Dollar (CAD) (-0.74%). The Euro strengthened against the TRY (6.05%) and the NZD (0.70%).
  • From the Eurozone, there has been geopolitical simmering as tensions between Russia and the bloc continue to escalate. Data wise, EUR inflation data came in at 5%, as expected.
  • Coming up this week we have EU unemployment data. This is expected to come in stable at 7.2%. Additionally, we should monitor the developing situation with Russia as this could result in instability in the market.

GBP

  • A stellar performance from the sterling last week, weakening only against three currencies: The ZAR (-0.29%), the PLN (-0.23%) and the Brazilian Real (BRL) (-0.12%). The Pound’s most drastic strengthening was against the TRY (6.38%) and the Japanese Yen (JPY) (1.13%).
  • There was minimal data from the UK. The Pound’s continued strength could be due to the surprise interest rate hike from last year and traders coming back into the market after the New Year’s break.
  • There are no noteworthy events in the UK this upcoming week. The main events are UK retail sales on Tuesday and the November trade balance data coming out on Friday. The GBP will generally take cues from global developments.

ZAR

  • Stellar performance across the board from the ZAR, which strengthened against all the top 20 currencies, the most notable being the TRY (7.11%) and the JPY (2.07%).
  • Over the New Year’s period, the ZAR weakened drastically, which pushed the currency into deep oversold territory. This, together with the US Fed asset purchase tapering and the UK interest rate increases, put the ZAR on the back foot as the year started. With such a drastic move to the upside, it was expected that the ZAR would pull back, which is what happened last week.
  • There is not much to mention on the data front this week. With the ZAR having pulled back as much as it did, the currency could experience some weakness again, although that remains to be seen.

AUD

  • The AUD weakened against 12 of the top 20 currencies with the most notable being the PLN (-1.07%) and the ZAR (-1.05%). The AUD strengthened against the usual suspect, the TRY (5.72%) and the RUB (0.70%).
  • The data events from Australia have been few and far between, and the past week was not very interesting.
  • Coming up, we have the Australian balance of trade for November and retail sales for November. These figures are expected to disappoint which will be AUD negative.

NZD

  • A bad week for the NZD, which strengthened against only two of the top 20 currencies. This was against the TRY (5.41%) and the JPY (0.19%). The major weaknesses were against the PLN (-1.29%) and the ZAR (-1.27%).
  • There was no New Zealand data worth mentioning from last week.
  • This week, there are no major data points. We should look to see how the currency takes cues from 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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