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Market predictions and forex forecasts for the week of 13 December 2021.

Weekly market report for the week ahead

Week starting 13-12-2021

 

USD

  • The USD weakened over the past week, with the catalyst being lower-than-expected inflation data on Friday. The US Dollar weakened against 14 of the top 20 currencies, most notably against the Norwegian Krone (NOK) (-2.62%) and the Australian Dollar (-2.33%). The USD strengthened against the Turkish Lira (TRY) (1.34%) and the Indonesian Rupiah (IDR) (0.62%).

  • The main event from the past week was the inflation data, which came in lower than anticipated. This is generally a good thing as the market was worried that out of control inflation would result in the Fed accelerating its lead-up to raising interest rates.

  • Wednesday will be an important day this week as the US retail sales, the Federal Open Market Committee (FOMC) economic projections, and the Fed interest rate decision will be released. The following press conference will be important as the events will advise as to when the market can expect interest rate hikes.

EUR

  • The EUR had a bad week, weakening against 13 of the top 20 currencies. The EUR weakened against the NOK (-2.44%) and the AUD (-2.22%), whilst strengthening against the TRY (1.51%) and the Indian Rupee (INR) (0.71%).
  • Over the past week, we had the EUR GDP growth data. This data disappointed, as expected. Although still positive, it dropped from 14.4% YoY to 3.7%, which is quite a decline.
  • Coming up this week, we have the European Central Bank’s interest rate decision on Thursday. It is expected that it will keep rates stable as per usual. On Friday, the inflation data will be released, which is expected to increase both year-on-year and month-on-month.

GBP

  • The Pound had a mixed performance last week, weakening against 10 of the top 20 currencies. The most notable weakness was against the NOK (-2.34%) and the AUD (-1.82%). The sterling strengthened against the TRY (1.71%) and then, quite surprisingly, against the Japanese Yen (JPY) (0.99%).
  • There was minimal data out of the UK last week, with the focus more on travel restrictions to try to quell the spread of the Omicron variant. The UK’s GDP growth came in below the forecast numbers, which is negative for the Pound.
  • There is a lot of data coming out of the UK this week. On Tuesday, we have the unemployment rate which is expected to remain stable at 4.2%. On Wednesday, inflation data will be released and is expected to increase slightly to 4.7% YoY. The main event on Thursday is the Bank of England (BoE) interest rate decision. The BoE has been slowly indicating the possibility of a rate hike. Although the rate hike is not expected at this meeting, the tone of the meeting and member votes will be noteworthy. On Friday, we have retail sales data releasing, which is expected to increase month-on-month.

ZAR

  • The moves from the ZAR were mixed, with weakness against 11 of the top 20 currencies. The biggest weaknesses were against the NOK (-1.98%) and the AUD (-1.85%), while the currency strengthened against the TRY (2.11%) and the JPY (1.11%).
  • Last week, South Africa’s GDP growth data came in worse than expected, with retail sales also disappointing to the downside. Something else to note were the comments by the IMF regarding the state of South Africa’s state-owned enterprises (SOEs), the blatant corruption within these and its effect on the credit rating of the country. The IMF suggested these should be liquidated and taken out of government hands.
  • The main event for this upcoming week is the South African inflation data. This is expected to increase once again, heading to the top of the South African Reserve Bank’s 6% top bracket. This comes off the back of soaring fuel prices and thus generally increased prices across the board.

AUD

  • The AUD had an amazing week, strengthening against all but one of the top 20 currencies. The (barely notable) weakness was against the NOK (-0.15%). The AUD strengthened against above 1% against most of the currencies, with the most notable being against the TRY (3.89%) and the JPY (3.04%).
  • The main data event from the past week was the Reserve Bank of Australia’s (RBA’s) interest rate decision. The RBA kept rates unchanged, but it seems the market saw the tone of their meeting as positive since the AUD came roaring back to power from the beginning of the week.
  • The most anticipated event this week is the unemployment rate on Thursday. The rate is expected to decline, which could be even more AUD positive.

NZD

  • Quite a mixed bag from the NZD, with weakness against eight of the top 20 currencies: the NOK (-1.82%) and the AUD (-1.71%), whilst the currency strengthened against the TRY (2.21%) and the JPY (1.74%).
  • There was no notable data from New Zealand last week.
  • This coming week sees the release of the NZD current account details for Q3. We expect a widening current account deficit, which is generally a currency negative event. The GDP growth figure is expected to contract, from 2.8% to -4.3% QoQ. This is understandable due to New Zealand being under various lockdowns. Depending on the actual number delivered, we can expect to see some volatility.

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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