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Market predictions and forex forecasts for the week of 4 October 2021.
Week starting 04-10-2021
- Over the past week, the USD strengthened against 18 of the top 20 currencies. The most notable strengthening was seen against the NZD (1.21%) and the MXN (2.26%). The only two currencies against which the USD weakened was the BRL (-0.49%) and the CNY (-0.17%).
- Recently, we saw the continuous struggle in American politics regarding the raising of the debt ceiling, keeping the government operating and able to pay wages. This is noteworthy as it is a risk factor until they come to an agreement.
- Data wise, we saw improvement from the US, with durable goods orders for August coming in at 1.8% from a level of 0.5%. On Thursday, we had the US GDP for Q2 coming in at 6.2%, up from the expected 6.1%.
- Employment data is due on Wednesday. Employment rates are expected to come in at 430k, up from 374k. On Friday, we have the infamous nonfarm payroll data for September. We are expecting to see an increase from 235k to 460k. If both these come in as expected, it should favour the USD.
- The past week saw continued volatility on the EUR/GBP pair. The currency pair traded mainly flat on Monday and Tuesday before posting significant gains during the midweek trading.
- Improved consumer and economic sentiment saw a higher-than-expected inflation rate (year-on-year) for September at 3.5%, the highest in three years.
- During the European Central Bank’s (ECB’s) central banker’s forum on Thursday, the ECB reiterated its commitment to looser monetary policy. Steering the economy out of the emergency conditions remains the priority as opposed to short-term prices rises (i.e. inflation).
- GBP/USD closed the week 1.00% lower. After starting the week at 1.3543 and touching a low of 1.3533, the pair ended trade on Friday around 1.3580.
- The GDP growth rate expanded by 5.5% during the second quarter of the year. This slightly outperforms expectations after the UK recorded a 1.4% contraction in GDP in Q1. The largest contributors to GDP growth came from wholesale and retail trade, accommodation and food service activities, education and human health, as well as social work activities.
- The current account balance for Q2 was also released last week. Despite expectations for a further widening of the current account deficit, the deficit narrowed from -£8.88 billion in Q1 to -£8.0605 billion.
- Final manufacturing PMI for September came in at 57.1, in line with the expected decline, after the previous month saw a figure of 60.3.
- The UK will release its balance of trade figures for August after a trade deficit of -£3.1 billion was recorded in July. Final services PMI for September will also come due, along with August’s figure for construction output, industrial production, and manufacturing production.
- In the past seven days, the ZAR has gone mostly unchanged against major currencies. Interday volatility was extended and created a seemingly stronger Rand overall. The Rand is currently trading at 20.279 against the GBP, 14.947 against the USD and 17.342 against the EUR.
- September did see the Rand weaken by 8.25% with the Fed’s hawkish approach for the tightening of monetary policies in the US. This coupled with the upcoming QE tapering has given most developing countries a knock.
- Further Rand weakness is expected in the coming months as the concern around commodity supply constraints from China and its impact on the global recovery post pandemic is growing.
- GBP/AUD made a move to the downside, depreciating by 0.90%. After opening at 1.8845 on Monday, the pair closed off above the 1.8660 support level.
- Last week, there was little data for Australia. Preliminary building permit numbers grew unexpectedly by 6.8% during August, despite a forecasted decline of 5%, rebounding from the previous month’s contraction of 8.06%. Furthermore, final manufacturing PMI came in at 56.8 for the month of September, up from 52 over the month.
- This week, there will be various points of economic data coming out of Australia. Australia’s balance of trade for August will be released, after the previous reading of AUD 12.117 billion. Retail sales data for August will also come due and is expected to expand by 1.7% after retail sales shrank by 2.7% in July. The National Australian Bank’s business confidence for September will also be released.
- The Reserve Bank of Australia (RBA) will release its most recent interest rate decision this week. The RBA is expected to hold the cash rate at the ultra-low 0.1% level, in line with the broader global monetary stance.
- Building permits issued in August increased by 3.8% compared to the previous month, reaching a record high of 4,378 consents issued.
- The NZD weakened against nine of its 10 main trading partners over the past week. The NZD is currently trading at 1.44 against the Dollar and 1.95 against the Pound.
- The Reserve Bank of New Zealand (RBNZ) kept the cash rate at 0.25% during its August meeting after New Zealand was put into an emergency lockdown . The RBNZ has another interest rate decision to make on Wednesday. Policymakers are expecting a price hike before year end to anchor inflation targets. RBNZ officials have made comments strongly suggesting that the increase could be a 25 basis point increase this Wednesday.
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