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Market predictions and forex forecasts for the week of 6 June 2022.
Week starting 06-06-2022
We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.
- The US Dollar had a decent performance in the forex markets, with the Dollar Index (DXY) gaining 0.46%. The USD strengthened against a faltering Pound by 1.04%.
- Last week, the US nonfarm payrolls report (NFP) for May was released. The latest NFP came in at 390,000, exceeding estimates of approximately 325,000. Although this reading was higher than expected, the report indicates a decline from the previous month’s 436,000 figure. The US unemployment rate was recorded as 3.6% in May, remaining flat from the prior month, despite a forecasted decrease to 3.5%. Additionally, the ADP unemployment change came in at 128,000, underperforming the consensus estimate of 200,000.
- This week, the US balance of trade for April will be released today, 7 June. The country’s current trade deficit is expected to narrow, from $109.8 billion in March, to $90 billion. Additionally, the US inflation rate for May will be released on Friday. Inflation is expected to come in at 8.3% (YoY).
- The EUR had a mixed trading week last week. The EUR strengthened significantly against the GBP and the Japanese Yen (JPY) as prospects for monetary tightening increase. On the other hand, the EUR weakened marginally against the USD and the Swiss Franc (CHF), as inflation fears continue to dominate discussions on the Eurozone economy.
- The most important data that was released last week include the updated inflation rate for the region. Inflation came in at 8.1%, compared to previously recorded 7.4% (YoY). Apart from inflation figures, a higher-than-expected manufacturing and services sector PMI was released, indicating increased economic activity in the region. Additionally, the PPI numbers that were recorded were lower than what was expected (1.2% compared to the expected 2.6%).
- This week, investors will keep an eye on the GDP figures, which will be released on Wednesday for any signs of a recovering economy in the Euro area. The ECB interest rate decision will be released on Thursday, although this is expected to remain unchanged. Rhetoric from the ECB remains hawkish as a downscaling and conclusion of the APP is being discussed as well as a potential rate hike later this year.
- The Pound had an unimpressive week of trade, weaking against most major currencies. The GBP/USD pair moved 1.04% lower during the week, from an open of 1.2617. After reaching a one-week low of 1.246 on Tuesday, the pair regained some ground and closed off at 1.2485 on Friday. The GBP/EUR pair followed a similar price path, shedding 0.93% in value throughout last week and closing at 1.165.
- Last week was light on UK data due to the two bank holidays on Thursday and Friday. However, the data that was released pointed to average economic activity. This is evident in the lower consumer credit figure and manufacturing PMI which came out as expected.
- There is minimal data expected from the UK this week. Investors will mostly keep an eye on UK services PMI and the GDP data from the US. The outcomes of the confidence vote on Boris Johnson should also dispel some uncertainty going into the latter part of the week.
- The South African Rand ended last week in the green, strengthening against most major currencies. USD/ZAR and EUR/ZAR fell by 0.25% and 0.34%, respectively. The GBP/ZAR pair made a more pronounced movement, falling by 1.28% during last week’s trade. After opening at R19.65 on Monday, the pair closed the week around the R19.40 mark.
- Last week, the South African unemployment rate for Q1 of 2022 was released. The unemployment rate came in at 34.5%, edging lower from the previous reading of 35.3%. This figure was lower than expected, with markets anticipating another consecutive increase in unemployment. South Africa’s balance of trade for the month of April was also released last week. The country’s trade surplus narrowed to R15.49 billion during the observed period, from an upwardly revised R47.20 billion. Exports slipped by 19.1% from a month earlier, while imports fell at a slower 2.9%.
- South Africa’s Q1 GDP growth rate will be released today, 7 June. GDP Growth is expected to come in at 1.0%, after the figure of 1.2% was recorded the prior quarter. The SACCI business confidence index for Q2 will be released on Wednesday. The South African current account balance for Q1 will be released on Thursday. The current account surplus is expected to rise again, towards R150 billion, after contracting to R120 billion in Q4 of 2021. April’s figures for gold, mining, and manufacturing production will be released on Thursday.
- The Australian Dollar strengthened significantly in the markets last week, ahead of the RBA’s interest rate decision. The GBP/AUD pair depreciated by 1.65% during the week, after kicking off at 1.7633 on Monday. After falling sharply and touching a low of 1.7283, the pair closed the week at the 1.7315 level. The AUD was able to muster up strength against the USD, gaining 0.64% against the greenback. During last week’s trade, the USD/AUD pair fell from an open of 1.3974 and closed at 1.3873 on Friday. Additionally, the AUD made some substantial gains against its Kiwi counterpart, as the AUD/NZD pair moved 1.11% higher. After starting last week at the 1.0950 level, the pair touched a high of 1.110, before closing the week around the 1.1075 level.
- Last week, the Reserve Bank of Australia decided to raise its benchmark interest rate by 50 basis points, increasing from 0.35% to 0.85%. The rise in central bank interest rates exceeded market expectation of a 25-basis-point increase. This marks the first consecutive rate hikes in over 12 years, as the Australian Central Bank signals confidence in its country’s economic recovery. This is supported by the current unemployment rate, which now sits at a 50-year low.
- Still to come this week, the NAB business confidence reading for May will be released on Wednesday. This should provide market participants with additional insight into changes in structural economic conditions, to forecast future growth.
- The New Zealand Dollar had a mixed trading week last week. The NZD gained on the struggling Pound and shed 0.46% of its value against the USD. The NZD lost some significant ground on its Australian counterpart as the AUD/NZD pair appreciated by 1.11%.
- Last week, New Zealand’s Q1 terms of trade rose by 0.50% – in line with expectations. Export prices rose by 7.8%, while import prices increased by 7.2%.
- This week will be very light on New Zealand data with nothing other than Q1 manufacturing sales to be released.
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