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Currencies included: USD, EUR, GBP, ZAR, AUD and NZD

 

Data releases and relevant current affairs for the week

Currency movement forecasts, market analysis and expected data release results

Important events and predicted effects on currencies

 

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Market predictions and forex forecasts for the week of 22 November 2021.

weekly market watch 11 January 2021

Week starting 22-11-2021

 

USD

  • The USD had a stellar performance last week. Overall, we have seen USD strength against all but three of the top 20 currencies, with its weakness being minor against the GBP (-0.19%) and Indian Rupee (INR) (-0.02%). The most drastic moves were seen against the Turkish Lira (TRY) (9.35%) and the ZAR (3.06%).
  • On the data side of things, US retail sales surprised to the upside, which gave the USD quite a boost. This propelled the US Dollar index to a one-year high, showing improved Dollar sentiment.
  • The main event this week is the US GDP data on Wednesday. This is expected to tick up to 2.1% from 2%, which would be USD positive, whereas a miss could lead to some weakness. Something else to keep an eye on is the US Federal Open Market Committee (FOMC) minutes. These should give the market an indication of the pace that the Fed plans to tighten its policy going forward.

EUR

  • This past week, the Euro weakened against nine of the top 20 currencies. The most significant weaknesses were against the Indonesian Rupiah (IDR) (-1.31) and the GBP (-1%) whilst improvements were seen against the TRY (8.07%) and the ZAR (2.12%).
  • There was nothing special about last week’s data, with GDP coming in unchanged, as expected, at 2.2% QoQ and 3.7% YoY. The one slight outlier was the inflation data with came in at 2% YoY from an expected 2.1%. Overall, geopolitics was the main factor moving the EUR.
  • The main data even this week is the EUR Markit PMI data. This is expected to drop slightly from 54.2 to 53.1. This event is minor and not expected to be positive for the EUR.

GBP

  • From the UK, we have seen an amazing performance across the board. The GBP strengthened against all the top 20 currencies. This came off the back of a flurry of improved data from the UK. The most drastic moves were seen against the TRY (9.52%) and the ZAR (3.25%) to the upside.
  • Vastly higher inflation in the UK, together with lower unemployment and higher average earnings, mean an expected rate hike as early as December. This can be seen in the performance of the currency with positive moves against all the currencies.
  • Coming up this week, we don’t have much happening on the UK data front. The most noteworthy event is the Markit services and manufacturing PMI data on Tuesday, which is a leading indicator of employment and general growth in the UK economy.

ZAR

  • Last week saw shocking weakness across the board from the ZAR, with the currency only strengthening against the TRY (5.76%) and the Brazilian Real (BRL) (0.21%). The largest losses were against the GBP (-3.4%) and the USD (-3.13%).
  • Last week, South African inflation come in at 5% YoY. This was expected but sits at the top of the South African Reserve Bank’s (SARB) range when it comes to inflation targeting. Retail sales improved better than expected, with growth of 2.1% YoY compared to an expected contraction of 0.2%. The main event, however, was the interest rate decision from the SARB. Although the market consensus was that they would keep rates stable at 3.5%, the market had started pricing in a rate hike of 25 basis points. This was realised when the SARB raised rates on Thursday. Although classical economics would deduce that this would lead to appreciation of the currency, we saw the ZAR weaken. This could be due in part to contagion effects from other emerging markets, such as Turkey, who cut rates.
  • Coming up this week, we will see how the market has digested the unchanged credit ratings from S&P, which was generally expected. The producer price index (PPI) will be announced on Thursday. With the PPI being a leading indicator of inflation, it is expected to increase slightly. The currency will likely take its cues from events in the emerging market space and other global events.

AUD

  • The AUD has weakened over the past week, where gains were only seen against six of the top 20 currencies. The AUD weakened against the INR (-1.65%) and the GBP (-1.48%) and strengthened against the usual suspects of the TRY (7.54%) and the ZAR (1.62%).
  • There was minimal data for Australia. The main event was the Reserve Bank of Australia (RBA) minutes, which outlined how it anticipates moving forward with policy relating to interest rates and stimulus for the economy.
  • Coming up this week, we have Australian retail sales data on Friday. The data is expected to increase from 1.3% to 2.5% MoM and would give the AUD some positive news and possibly lead to slight gains.

NZD

  • Mixed signals on the New Zealand front, with the NZD weakening against eight of the top 20 currencies. The weakness was insignificant, with the most major moves being against the GBP (-0.74%) and the INR (-0.77%). The biggest gain was against the TRY (8.68%) and the ZAR (2.37%).
  • The main data point from New Zealand was a lower growth figure in the producer price index, a leading indicator of inflation.
  • The main data events to expect this week are the retail sales data today and the interest rate decision on Wednesday. New Zealand’s retail sales data is expected to drop slightly. The general market consensus is that the Reserve Bank of New Zealand (RBNZ) will be raising rates by 25 basis points. This would be partially priced in, but we can expect some volatility around this.

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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