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Market predictions and forex forecasts for the week of 20 December 2021.
Week starting 20-12-2021
- The USD had an incredible week, strengthening against 18 of the top 20 currencies. The only weaknesses were against the ZAR (-0.72%) and the Mexican Peso (MXN) (-0.21%). The largest gains were against the Turkish Lira (TRY) (18.42%) and the Canadian Dollar (CAD) (1.27%).
- This past week, the main events were the Federal Open Market Committee (FOMC) meeting and the Fed interest rate decision. The interest rate was kept stable at 0.25%. Fed chair Jerome Powell made it clear in his press conference that the tapering of asset purchases by the Fed would gain momentum – leading traders to price in two to three rate hikes for next year. This resulted in USD strength.
- This coming week, the focus will be on personal income and durable goods orders data.
- The EUR had a bad week as its major peers all start the process of raising interest rates, whereas the EUR countries are stuck at 0%. The Euro weakened against 11 of the top 20 currencies, with the most notable being against the ZAR (-1.37%) and the USD (-0.72%). The Euro strengthened against the TRY (17.76%) and the Brazilian Real (BRL) (0.78%).
- Last week, the European Central Bank’s interest rate decision was announced and was kept stable at 0%, as expected. The market is currently more concerned with the spread of the new Omicron variant throughout Europe.
- Coming up this week, there is nothing noteworthy as the region quietens down for the festive period.
- The surprise rate hike by the Bank of England (BoE) led to the sterling performing well. The Pound strengthened against 16 of the top 20 currencies. It weakened, most notably, against the ZAR (-0.80%) and the USD (-0.27%). The currency strengthened against the TRY (18.34%) and the CAD (0.92%).
- The main event from the past week was the rate hike by the Bank of England. This caught the markets off guard and resulted in a sudden jump in the value of the sterling. This was short-lived, however, as the GBP undid most of the gains in the hours following the announcement. The rate hike by the BoE can be explained by inflation hitting multi-year highs, coming in at 5.1% YoY for November.
- This week, the most notable event is the GDP growth data for Q3. The growth figure is expected to come in at 5.5% QoQ.
- Last week, the ZAR reigned supreme, weakening only against the MXN (-0.21%) and strengthening against the other 19 of its top 20 peers. The biggest moves to the upside were against the TRY (18.34%) and the CAD (1.61%).
- Data wise, the South African inflation rate come in higher than expected on Wednesday. Apart from this, the currency strengthened drastically after news broke of credit rating agency Fitch upgrading the sovereign rating of South Africa from negative to stable. The market was surprised at the move, and the currency became one of the top performers last week.
- This week, the focus will be on the fourth wave of Covid infections.
- The Australian Dollar weakened against 12 of the top 20 currencies. The largest losses were against the ZAR (-1.25%) and the MXN (-0.91%), while the largest gains were against the TRY (17.40%) and the CAD (0.63%).
- It was a quiet week on the Australian data front. The focus was the unemployment rate which dropped to 4.6%, better than the anticipated 5%.
- The Reserve Bank of Australia’s (RBA’s) meeting minutes will be published this coming week. This will reveal if the RBA will raise interest rates as many other central banks are currently doing.
- The New Zealand Dollar also had a bad week and only strengthened against four of the top 20 currencies. The largest gains were against the TRY (17.40%) and the CAD (0.42%) while the most significant losses were against the ZAR (-1.51%) and the MXN (-1.20%).
- The past week had only one notable data event – the GDP growth rate. The growth rate contracted less than expected, to -3.7%, whereas the market expected a drop of 4.5%.
- The most notable event from New Zealand this week will be the balance of trade figures on Monday.
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