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Market predictions and forex forecasts for the week of 11 April 2022.
Week starting 11-04-2022
We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.
- The USD had another stellar week, strengthening against all the top 19 currencies monitored. The largest gains were against the Japanese (JPY) (2.16%) and the Brazilian Real (BRL) (2.18%).
- Last week, Fed representatives indicated that the pace of the rate hiking cycle in the US would increase more than anticipated. This led to the market betting on a hawkish fed policy, as reiterated in the FOMC minutes, released on Wednesday. These are the main reasons why the USD strengthened.
- This week, the new US inflation data will be released on Tuesday and is expected to hit some astronomical highs, due to the higher cost of energy. This higher inflation is a major concern for US policy makers and remains the driving factor behind the US Fed rate hiking policy.
- The Euro has recovered slightly from its dismal performance over the past month, strengthening against 11 of the top 19 currencies. The most notable gains were against the BRL (1.4%) and the JPY (1.37%), whilst the worst losses were against the Indonesian Rupiah (IDR) (-1.1%) and the USD (-0.81%).
- There was no interesting data from the EU last week. The main takeaway was that the market is expecting quite an aggressive interest rate hiking trajectory from the European Central Bank (ECB), although we still need to see any action on this front. In addition, we remain cognisant of the ever-present threat of the war in Ukraine and all possible spill over effects of this.
- Coming up, we have the ECB interest rate decision on Thursday. Although no change is expected, the tone of the meeting should be watched and could lead to some major market moves.
- The GBP had a mixed performance against its major trading partners, with the Pound weakening against nine of the top 19 currency pairs. The largest decline was against the USD (-0.89%) and against the Chinese Yuan (CNY) (-0.65%), while it increased against the JPY (1.22%) and the BRL (1.17%).
- There was minimal data from the UK last week. The main concern for the UK and European markets remains the sanctions on Russia and Russian energy. This has kept the GBP under pressure as the markets are concerned about the impacts on the consumer.
- This week, we have two major events: The UK gross domestic product (GDP) growth figures and the UK inflation data. The UK’s GDP is expected to increase slightly – which should be GBP positive. The UK inflation data will be released on Wednesday and is expected to increase. This is concerning for the purchasing power of the UK consumer.
- The South African Rand has had a generally good week, strengthening against 12 of the top 19 major currencies. The most notable strengthening was against the BRL (1.44%) and the JPY (1.71%) whilst the most significant weaknesses were against the USD (-0.61%) and the CNY (-0.51%).
- There was no significant data out of South Africa last week. The continuous ZAR strength has been attributed to the resilience in commodity prices as well as the strength in its similar peer currencies.
- This week will be a shortened week of trading and we can expect little data from South Africa. The main events will be the retail sales on Wednesday, followed by gold production, which is expected to increase by 10% (YoY) – not surprising given the high gold prices.
- Finally, the outrageous run from the Australian Dollar has lost steam, with the currency weakening against 15 of the top 19 currency trading pairs. The AUD strengthened the most against the BRL (0.93%) and the JPY (0.61%) whilst weakening most significantly against the USD (-1.52%) and the IDR (-1.19%).
- Last week Monday, the Reserve Bank of Australia (RBA) released its interest rate decision. Although it did not raise rates, it indicated there is a possibility of rate hikes soon, which strengthened the AUD drastically. This move was short lived, and the currency eventually depreciated as the week went on.
- This week, the main event is the Australian unemployment data on Thursday, which is expected to remain moderately stable. We expect the market to be influenced by geopolitical issues more than local data.
- Like the AUD, the New Zealand Dollar has taken a breather from its stellar run over the past month, strengthening against only one currency, that being the JPY (0.44%) with the major weaknesses against the USD (-1.70%) and the Norwegian Krone (NOK) (-1.45%).
- There is no significant data from New Zealand, as the currency has been riding on the coattails of the AUD strength.
- This week, we have the New Zealand interest rate decision on Wednesday. It is expected to rise rates by 25 basis points, to 1.25%. If there is any deviation from this, we would expect some volatility in the currency.
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