Market predictions and forex forecasts for the week of 11 October 2021.

Weekly market assessment for the week ahead

Week starting 11-10-2021

 

USD

  • The United States’ most recent nonfarm payrolls report was released last week. The September report indicated that an underwhelming 194,000 new jobs were added to the US economy over the past month. This reading came in lower than August’s 366,000 figure, which also came in lower than expected.
     
  • The US balance of trade for August came due last week. America’s trade deficit widened by $3 billion over the past month, from $70.3 billion to $73.3 billion, exceeding the forecasted uptick of $0.5 billion.
     
  • The GBP/USD moved 0.46% higher during last week. The pair opened at 1.3550 on Monday and touched a high of 1.3657 before closing above the 1.3610 level of resistance. Nevertheless, the Dollar Index (DXY) narrowly finished the weekly trade in the green, marking the fifth consecutive week of appreciation for the DXY.
     
  • This week, the Federal Open Market Committee (FOMC) minutes will release from the Federal Reserve’s most recent monthly meeting. The inflation rate data and Job Openings and Labour Turnover Survey (JOLTS) data will also be released. The US inflation rate is expected to hold steady at 5.3% (YoY) for September after inflation rose to a 13-year high of 5.4% in August. Furthermore, JOLTS job openings data is expected to decline towards 10.8 million. This comes after the number of job openings in the US rose by 749,000 from a month earlier to a new series high of 10.934.

EUR

  • This week we saw the EUR/GBP pair fall to its lowest in over three weeks. The pair fell for most of the week, with higher than usual volatility recorded in the early parts of the week.
  • The main driver of movement this past week has been inflation fears. The surge in energy prices along with continued supply chain woes has contributed to the high inflation observed in September. This trend is expected to continue for the rest of the year.
  • Rhetoric from the European Central Bank (ECB) remains accommodative to looser monetary policy (continuing to cap the EUR). The ECB has, however, mentioned that higher inflation brought on by supply chain problems and the energy crisis may cause concern if it lasts for too long. This may prompt the ECB to act in the medium to long term.

GBP

  • Last week, The UK’s purchasing managers’ index (PMI) figures for September were released. Manufacturing PMI came in at 54.9, up from 54.8 in August, despite a forecasted decline towards 54.1. Similarly, services PMI moved up marginally, from 55.0 to 55.4, despite the expected fall to 54.6. Construction PMI for September was also released and fell from 55.2 to 52.6.
  • This week, we will hear about the state of the UK labor market. The unemployment rate for August will be released, after the previous month’s reading of 4.6%. September's claimant count change figure will also release and is expected to decline by a further 46,000 claims after the claimant count declined by 58,600 claims in August.
  • The UK’s balance of trade reading for August will also come due. The trade deficit is expected to shrink towards £2.4 billion after a deficit of £3.1 billion was recorded in July.

ZAR

  • Other than September’s Markit PMI number and foreign exchange reserves figures, there was no new data released.
  • Last week, the GBP/ZAR moved 1.06% higher during the round of trade. The pair closed off at R20.35 on Friday from an open of R20.16 on Monday. The Dollar and Euro held up better against the Rand compared to the Pound. Nevertheless, both USD/ZAR and EUR/ZAR pairs made a move to the upside, appreciating by 0.57% and 0.34% respectively.
  • This week, we have retail sales data due, along with production figures for manufacturing, gold and mining production. Retail sales growth is expected to shrink by 2% (MoM) for September, after the previous month saw retail sales decline by 11.2%. For a year-on-year basis, retail sales numbers are expected to dip by 0.8% after 1.3% growth was recorded in July.
  • Manufacturing production in South Africa is expected to increase by 7.5% (YoY) in the August report. This will come after the -4.1% reading in the previous month. Gold and mining production are also expected to rise on a year-on-year basis by 10% and 6%, respectively.

AUD

  • Last week, the Reserve Bank of Australia (RBA) submitted its most recent interest rate decision. The RBA kept its cash rate at 0.1%, in line with expectations. Australia’s balance of trade report also came due. Australia’s trade surplus widened from AUD 12,650 billion to AUD 15,077 billion during the month of August, despite an expected decline towards AUD 10 billion.
  • Retail sales growth data for the month of August was released last week. Retails sales shrank by 1.7%, furthering the 2.7% contraction in July. Services PMI came in at 45.5 in September, exceeding the forecasted increase to 44.9 after a figure of 42.9 was recorded in August.
  • This week, Australian employment data will be released. The country’s unemployment rate for September is expected to tick upwards towards 5.2% after the reading of 4.8% in August. The corresponding employment change figure will be also reported after August revealed a loss of 146,200 jobs. Of these lost jobs, 68,000 were full-time positions and 78,200 were part time positions.
  • The National Australian Bank (NAB) business confidence index for September will be released and is expected to fall to -8 from a previous reading of -5. Additionally, the Westpac consumer confidence reading for October releases after the index increased by 2.0% last month. 

NZD

  • Policymakers in New Zealand have increased the official cash rate by 25 basis points to 0.5% during the October meeting. This was the first time interest rates in New Zealand have increased since June 2014. Policymakers have indicated that the decision was appropriate to maintain low inflation while supporting maximum employment.
  • The NZD weakened roughly 0.65% against the Pound and roughly 0.2% against the USD last week, currently trading at 1.964 GBP/NZD and 1.44 USD/NZD.
  • On Thursday, we expect the release of the Business NZ’s performance of manufacturing index pertaining to September.

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