The first week of the new year was very busy with the economic diary. Once more, America’s politics took center stage in this week’s forex market predictions. Forex traders also interpreted covid 19 news and economic updates to provide directions for the g7 currencies.
Here is how G7 currencies performed in the first week of January….
- The greenback staged a comeback.
- Haven currencies lost to the dollar.
- And, while riding on positive global sentiments, the riskier assets emerged victoriously.
Several fundamentals combined forces to affect the performance of the g7 currencies over the week.
The Fundamentals
Covid 19 News
The covid news had a mixed reaction in the forex market. On the negative side, coronavirus infections continued to accelerate and cause havoc. Many countries across the U.S. and Europe reverted to strict lockdown measures.
Globally, confirmed cases hit 90m while fatalities moved closer to 2m in the week – a clear indication that the war on the deadly virus is still far away.
In Europe, many countries like Germany recorded increased fatalities amid increasing concerns over the coronavirus new variant. The new variant is causing more worries as it spread faster and has been linked to increased deaths since its discovery.
On the positive side, however, the ongoing PfizerBioNTech vaccinations and approval of Moderna inc, and AstraZeneca vaccines outweigh the negative effects of the coronavirus pandemics.
Economic Update
While the covid 19 news affected the forex market positively and negatively, economic updates from many economies also affected the forex market. Some countries posted positive while others posted negative updates, with a few posting a mixed bag.
Generally, improved economic conditions favor the riskier markets.
The U.S. Politics
In the week ending 10th January the democrats clinched the senate race fueling positive expectations of significant fiscal support. The Democrats’ win weakened the gains made by the greenback earlier in the week. And the U.S. vice president Pence tells Trump that he has no authority to block the U.S. presidential election outcome.
On Wednesday, Donald Trump supporters took to the streets and demonstrated against President-elect Joe Biden’s certification victory. The demonstrations sparked risk aversion measures among forex traders boosting the American dollar.
However, congress finalized Joe Biden’s win on Thursday, turning the negative sentiments into positive ones. The positive sentiments favored riskier assets.
Crude Oil Prices
Supported by positive global sentiments from covid 19 vaccines and improved economic outlook, crude oil prices rallied strongly. Over the first week of the year, oil prices increased by 7.67% to close at $52.24 per barrel.
G7 Currency Economic Review & Performance Weekly Wrap
Table: g7 performance summary
| Currency pair | 4th January | 10th January | Average | Percentage change | Remark |
| USD | 89.845 | 90.068 | 89.723 | 0.194 | increase |
| GBP/USD | 1.3569 | 1.3519 | 1.3574 | 0.76 | drop |
| EUR/USD | 1.2231 | 1.2273 | 1.2257 | 0.02 | increase |
| USD/CHF | 0.8813 | 0.8875 | 0.8827 | 0.2753 | increase |
| USD/JPY | 103.10 | 103.94 | 103.45 | 0.72 | increase |
| USD/CAD | 1.2777 | 1.2702 | 1.2698 | 0.20 | drop |
| AUD/USD | 0.7663 | 0.7759 | 0.7757 | 0.82 | increase |
| NZD/USD | 0.7173 | 0.7242 | 0.7242 | 0.75 | increase |
USD Rebounds
After closing below 90 in the previous week, the American dollar managed to close in the positive territories. Overall, the greenback had a mixed week starting at below 89.209, it rebounded and closed stronger by 0.18%. Previously the dollar had lost 0.32%.
Positive economic updates, covid 19 news, and politics affected the performance of the American dollar. The U.S. administration posted positive economic data.
The production manufacturing index increased from 57.6 to 60.7, while the Services sector index rose from 55.9 to 57.2. On a positive note also was the weekly jobless claims dropped from 790k to 787k.
However, nonfarm payroll spooked, registering a 140k fall by the close of the week. But despite the fall in nonfarm payroll, the unemployment rate remained unchanged at 6.7%.
GBP/USD
The British Pound started the year on the wrong foot amid renewed lockdown measures to fight coronavirus spikes. Poor economic data, covid 19 news, and U.S. politics affected the forex market predictions.
In the end, the Pound dropped by 0.76% to 1.3568. In the week before, the Pound had grown by 0.85%. On the economic front, Britain released negative data. Construction, manufacturing, and service sectors performed poorly, adding pressure to the Pound.
Furthermore, the Reintroduction of lockdown measures added more pressure to the negatively skewed economic data. However, the ongoing covid 19 vaccinations and AstraZeneca vaccine approval provided support to the British Pound.
EUR USD Latest News
According to eur usd latest news, the euro rose dismally by 0.02% to close at 1.2218 to the American dollar. In the previous week, the euro had risen by 0.18%. The performance of the euro was driven by covid 19 news, economic updates, and post-Brexit news.
The eurozone posted mixed economic updates, which had a muted influence on the performance of the euro. The manufacturing and service sectors improved to uplift the euro.
On the other hand, the unemployment rate dropped to 6.1%, and retail sales surged. While trade data shrank from 18.2bn to 16.4bn euros, industrial production and factory orders increased.
However, the Reintroduction of lockdown measures in the eurozone to combat the spread of coronavirus pulled down the positive impacts of positive economic data. However, the Moderna vaccine approval and U.S. politics saved the euro from the containment measures’ negative impacts.
USD CHF Forex News
In the forex market predictions, the traders also considered economic updates and positive sentiments caused by the ongoing coronavirus vaccinations in several countries. But the Swiss franc emerged as a net loser by the end of the week.
According to investing.com, the swiss data franc dropped by 0.2753% to close at 0.8875 to the American dollar. The Swiss consumer price index reduced by 0.1% on the economic front, but retail sales figures increased by 1%.
Towards the end of the week, positive sentiments in U.S. politics featured strongly in usd chf forex news. More pressure on the Swiss franc came from the increasing covid 19 infections, the reintroduction of lockdown measures, and escalating concerns over the new variant.
USD/CAD
The Canadian dollar fluctuated over the week as traders tried to balance the fundamentals in the forex market predictions. Canada’s negative economic update, U.S. politics, and oil prices affected the performance of the Lonnie.
On the economic front, trade deficit and employment figures reduced. The decline in employment pushed the unemployment rate up from 8.5% to 8.6%. Over the week, oil prices improved, and hopes on U.S. fiscal stimulus materialized, uplifting Lonnie.
In the week ending 10th January, the Canadian dollar grew by 0.20% to 1.2702. In the week before, it had rallied by 1.06%.
Aussie USD Forex
Following a strong rally in the previous week, the Australian dollar grew stronger to emerge as the week’s top performer. According to investing.com, the Aussie Dollar expanded by 0.82% to close the week at 0.7757 to the American dollar.
The Aussie USD forex prediction was driven by mixed economic data, covid 19 news, and U.S. politics. While Australia’s construction sector improved, the trade surplus shrank from A$7.456bn to A$5.022bn.
However, the Aussie Dollar found much-needed support from optimism towards the financial outlook. More support for the Australian dollar came from the ongoing covid 19 vaccinations and hopes of more U.S. fiscal stimulus.
NZD/USD
The kiwi dollar closed the week stronger by 0.75% to 0.7242 supported by positive sentiments. New Zealand did not post an economic update leaving forex market predictions of the kiwi dollar to Covid 19 news and U.S. politics.
Improvement in global dairy prices and economic recovery uplifted the kiwi dollar. More support came from U.S. politics when Joe Biden’s presidency was confirmed, fueling positive sentiments and more hopes on fiscal stimulus support.
USD JPY Forex News
Mixed economic updates, covid 19 news, and U.S. politics provided direction for the Japanese yen. According to Usd jpy forex news, the yen started the new year on the wrong foot. It fell by 0.72 % to 103.94 against the American Dollar.
In the previous week, the Japanese Yen had strengthened by 0.22%. In the mixed economic updates, the service and manufacturing sectors went on the upswing. However, household spending disappointed the yen by dropping by 1.8%.
The Japanese yen received more beating from increasing covid 19 cases in japan. In the week, Japan recorded a record new high number of deaths due to covid 19 and declared an emergency for Tokyo.
Conclusion
Positive global sentiments outweighed the coronavirus pandemics and the new covid 19 variant’s threats to drive forex market predictions. The positive sentiments elicited a strong appetite for the riskier but more profitable assets in the forex market.
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