In the second week of 2022, price volatility dominated the forex market. Current forex market trends show the week started in a positive mood. But mid-way, the sentiments turned negative.
Risk assets benefited from upbeat economic data and positive sentiments for the week. The yen took the top spot with the risk-on mood, and the US dollar settled at the bottom. US inflationary pressure and Feds comments were the critical market drives of the week. Despite a high inflation rate and Feds hawkish comments, the US dollar tumbled to start 2022.
The Fundamentals
Economic updates, politics, Omicron threats, central banks, and politics drove the market.
Positive Economic Updates
The G7 nations posted positive economic data, which uplifted their currencies. On the global scale, the world bank reduced the universal growth forecast to 4.1 percent for 2022. In 2021, the global economy expanded by 5.5 percent.
Easing Inflationary Pressure
Inflation data also drove current forex market trends this week as most updates came as projected or below. For instance, China’s consumer price index dropped to 1.5 percent from 2.3 percent.
However, the US inflation came in better than expected. Also, economic updates show global inflation stabilized, suggesting inflation fears have cooled.
Omicron Variant Threat
The COVID-19 threat is still here with us. World Health Organization data reveals a daily average of COVID-19 new cases hit a staggering 2.8 million over the week. Although the Omicron variant spread fast, it is less severe than the delta variant.
Hawkish Fed
On Tuesday, FED chair Jerome Powell calmed market fears about spiking consumer prices. Jerome plans to increase rates and end asset purchases in March to control the costs.
Following Powell’s comments, market risk sentiments shifted, and immediately riskier currencies appreciated.
WTI climbs above $83 per barrel
Commodity-linked assets rallied in the week thanks to spiking crude oil prices. The oil registered a fourth consecutive weekly gain. From a low of $78.23, crude oil rallied 6.24 percent to $83.82 a barrel, the highest level in seven years.
Crude oil prices rose on Russia-Ukraine conflicts, improved economic conditions, and the tumbling dollar.
Russia–Ukraine friction
Tensions between Russia and Ukraine intensified this week, threatening an armed conflict.
NATO and its allies met with Russia over Ukraine, but they reached no deal. The Russian government insists Ukraine should not join NATO. Intelligence from the US suggests Russia plans to attack Ukraine between mid-January and mid-February if Ukraine joins NATO.
G7 Economic and Fundamental Analysis
Table: g7 currencies performance summary
| Currency pair | 8th Jan 2022 | 14the Jan 2022 | Average price | Percentage change | Remarks |
| USD | 95.990 | 95.161 | 92.290 | 0.586 | drop |
| GBPUSD | 1.3575 | 1.3673 | 1.3658 | 0.6478 | increase |
| EURUSD | 1.1324 | 1.1414 | 1.1399 | 0.4842 | increase |
| USDCHF | 0.9272 | 0.9139 | 0.9178 | 0.5333 | drop |
| USDJPY | 115.20 | 114.20 | 114.70 | 1.17 | drop |
| USDCAD | 1.2678 | 1.2553 | 1.2565 | 0.7197 | drop |
| AUDUSD | 0.7168 | 0.7206 | 0.7230 | 0.3901 | increase |
| NZDUSD | 0.67555 | 0.6797 | 0.6808 | 0.2507 | increase |
Forex US Dollar News
It’s back to the red for the dollar! US dollar depreciated by 0.586 percent to 95.161 in the second week of January. A week before, the greenback had risen slightly by 0.07 percent.
A 0.65 percent loss on Wednesday significantly devalued the dollar as traders responded to a powerful surge in inflation numbers. Fed Chair Powell’s comments failed to support the dollar. Powell noted the need for three rate hikes this year.
In mid-week, the US posted its highest inflation rate in 40 years. The inflation rose seven percent, better than expected. Similarly, production prices shot 9.7 percent. But the inflation surge failed to spook current forex market trends.
On Thursday, Jobless claims added more woes to the dollar. The initial jobless claims increased to 230 thousand from 207 thousand. On Friday, retail sales data closed out the week. Against a forecasted 0.1 percent plunge, the sales tumbled nearly two percent.
Inherently, inflation increased while consumer activity declined. But unexpectedly, retail sales declined by nearly two percent as inflation weighs on consumer activities. Further, manufacturing slipped 0.1 percent, and consumer sentiments dropped to 68.8 percent.
The omicron surge had a muted impact on the forex US dollar news.
Forecast British Pound To Us Dollar
For the week, GBP rallied by 0.64 percent to 1.3675 against USD. Previously the pound had strengthened by 0.41percent. Retail sales supported the pound earlier in the week. The sales improved by 0.6 percent against a projected 0.3 percent rise.
The Omicron surge in the UK affected activities, causing mixed economic data. While retail sales rose 1.4 percent, employment took a hit. The manufacturing sector index fell to 57.9, and services edged lower to 53.6.
To forecast British pound to US dollar exchange rate, investors also considered consumer prices. The prices rose 5.5 percent, beating earlier projections. Production and GDP numbers came into focus to wrap the pound’s current forex market trends. Both production and GDP uplifted the pound.
Manufacturing performed better than expected. Previously, it had increased by 0.1 percent. It rose by 1.1 percent versus a 0.2 percent growth projection this time. Midweek, British economic growth supported the pound. Britain’s economy expanded by 0.9 percent.
Prime Minister Boris Johnson’s behavior pressured the pound. The Prime Minister is under attack for violating COVID-19 rules because his staff held overnight parties during the lockdown period.
Even though he did not attend the parties, he was aware of them, and now opposition parties want him to resign. All this came when the premier is also facing strong criticism on handling the Brexit negotiations.
EUR USD Rate Prediction
Finally, the euro turned back on its weekly losses! The euro gained 0.44 percent, having lost 0.08 percent previously. During the week, industrial production, unemployment, and trade data drove the euro’s current forex market trends.
Industrial production rose 2.3 percent, creating more jobs and lowering the unemployment rate to 7.2 percent. However, negative trade data weakened the euro. Eurozone’s trade data shrank from a surplus of 3.3billion to a deficit of 1.5billion euros, the highest deficit in eight years.
Considering the unimpressive economic data, it seems the dollar’s weakness supported eur usd rate prediction.
Swiss Franc Strength
The Swiss franc rallied 0.533 percent to 0.9139 after losing 0.7273 percent the week before. Despite the improved performance, Switzerland lacked economic data to boost its currency. Arguably, dollar weakness contributed to swiss franc strength.
Besides, Switzerland digitalized its banking industry. Stil on trial, it integrated five commercial banks into a central bank digital currency services (CBDCs).
CAD To USD Trend
The loonie rallied 0.72 percent this week. Previously, it lost 0.05 percent. Despite having an empty economic calendar, the Canadian dollar emerged as the second-best performer. The broad greenback weakness benefited the loonie.
Further, the robust growth in oil prices coupled with China’s economic solid update leveraged cad to usd trend exchange rate.
Meanwhile,
Here is the Current Forex Market Trends in the Asia-Pacific Region
It was a bullish week for all the Asia Pacific currencies, as risk sentiments soared in the Asian markets.
Currency Exchange USD To AUD
For the week, the Australian dollar rallied 0.36 percent to 0.7207. This came after losing 1.1295 percent the week before. A few economic data and dollar weakness pressured currency exchange usd to aud rate.
Australia’s retail sales surpassed the 3.6 percent growth projection. The sales went up 7.3 percent, the highest in two years. Australia posted positive economic data. First, it recorded over 366 thousand new jobs. Second, business conditions improved to pre-pandemic levels.
New Zealand Dollar Exchange Rate Trend
New Zealand’s currency gained 0.37 percent against the greenback. Economic data, dollar weakness, and risk on mood uplifted the New Zealand dollar exchange rate trend.
Economic data from the Kiwi land exceeded projections. First, inflation came in at 4.9 percent against a forecast of 4.1 percent. Second, the labour market report came in better than predicted as the unemployment rate declined to 3.4 percent versus 3.9 percent.
Also, the consents improved 0.6 percent after a previous 2.1 percent drop.
Japanese Exchange Rate Predictions
As expected, the Japanese yen outperformed the dollar in a risk-on environment. The yen gained due to risk sentiments and a weaker dollar.
Yen emerged as the week’s best performer as traders expect rate hikes to boost Japanese exchange rate predictions.
Week Ahead
The following is what we expect to drive the forex market in the coming week:
- economic data
- Could Boris Johnson’s bad press cause more harm to the pound?
- Would Russia attack Ukraine this week?
- Omicron developments
Final Thoughts
Current forex market trends saw plenty of volatility in the week as traders priced in economic updates and risk sentiments. Even though market fundamentals favored haven currencies, the riskier assets emerged more robust in the week.
And not even an inflation surge and hawkish Fed’s comments could save the greenback.