Economic data largely dominated recent trends in forex market until a new coronavirus variant hit the headlines on Friday.
With robust economic data and risk aversion, haven currencies dominated the market. Japan’s yen took the top spot, while New Zealand’s kiwi took the bottom spot.
Fundamentals
New COVID 19 Variant Sends Risk Assets Lower
Risk assets tumbled deeply this week while safe-haven currencies soared due to the new coronavirus variant detected in South Africa.
South Africa’s Health Minister Joe Phaahla indicated that the country had recorded an exponential rise in COVID 19 infections due to the new variant.
The World Health Organization (WHO) has raised concerns over the new variant because
- It is highly infectious than the previous delta variant
- It has an unusually higher number of mutations
- It is more resistant to the already developed vaccines due to the various mutations.
The g7 nations and other countries took preventive measures in response to the coronavirus concerns.
First, g7 nations banned travelers from South Africa, including five other southern African Nations. Second, several countries reverted to lockdown ahead of the December holiday season.
With the escalating coronavirus fears, forex traders deposited their money in the safety of the American dollar.
As it happens, European citizens didn’t take lockdowns kindly. Many of them demonstrated, leading to police confrontations.
Economic Updates
The week kicked off with concerns about inflation and fears that the Fed would taper sooner than expected.
Most of the G7 nations posted positive economic data, which drove recent trends in forex market. But the discovery of the Omicron variant later in the week sent financial markets into freefall.
Oil Forecast This Week
Pressured by the new coronavirus variant and travel restrictions, oil tumbled by 5% on Friday, closing the week below $72 per barrel. More pressure impacted the oil forecast this week as South Korea, India, China, Japan, and the US released their strategic oil reserves.
G7 Performance and Overall Economic Condition Review
Table: g7 nations performance summary
| Currency pair | 20th November 2021 | 26th November 2021 | Average price | Percentage change | Remarks |
| USD | 96.544 | 96.104 | 96.577 | 0.079 | increase |
| GBPUSD | 1.3396 | 1.3340 | 1.3351 | 0.8326 | drop |
| EURUSD | 1.1234 | 1.1317 | 1.1240 | 0.2480 | increase |
| USDCHF | 0.9330 | 0.9239 | 0.9320 | 0.4525 | drop |
| USDJPY | 114.96 | 113.31 | 114.81 | 0.59 | drop |
| USDCAD | 1.2698 | 1.2786 | 1.2692 | 1.1711 | increase |
| AUDUSD | 0.7223 | 0.7123 | 0.7192 | 1.5344 | drop |
| NZDUSD | 0.6956 | 0.6826 | 0.6892 | 2.6248 | drop |
US Dollar Exchange Rate News
In a week shortened by the Thanksgiving holiday, the US dollar climbed 0.079 percent to 96.104, rising by 0.95 previously. Coronavirus concerns and FED Chair Jerome Powell reappointment fueling dollars demand.
Early in the week, private-sector data dominated us dollar exchange rate news. The manufacturing index rose to 59.1 from 58.4, while services declined to 57.0 from 58.7, lowering the composite index to 57.
Ahead of the Thanksgiving festivities, several economic data drove dollars’ recent trends in forex market. Weekly jobless claims shrank from 270 thousand to 191 thousand, and personal spending increased by 1.3%.
Also favorable to the dollar, the PCE price index went up from 3.7 to 4.1 percent, and durable goods orders rose 0.5 percent. But third-quarter GDP figures, though positive, weighed on the greenback.
The GDP expanded by 2.1 percent from an impressive 6.7 percent growth in the previous quarter. Monthly personal income improved by 0.5 percent, with personal spending shooting 1.3 percent.
President Joe Biden nominated Jerome Powell to head the FEDs chair for a second term, ending months of uncertainty. Lael Brainard joined as Vice-Chair.
The Fed reassured the market that the US has low chances of another lockdown. According to the Fed Chair, increased vaccination rate and successful booster campaigns protected the country.
Fx Sterling USD
The pound shed 0.8326 percent against the dollar to 1.3337, having risen 0.28 percent previously. Coronavirus news and economic data impacted the fx sterling usd’s performance.
According to investing.com, positive economic data uplifted the pound at the beginning of the week. The service index rose to 58.6 from 54.6, and the manufacturing index shot to 54.7 from 54.1.
Industrial Trend Orders spiked to 26 from 9, uplifting the pound further. But at the end of the week, coronavirus concerns reversed the positive economic data, pushing the pound to the red zone.
EUR USD Forecast Prediction
The euro plunged further over the week as Europe became the epicenter of the latest coronavirus resurgence wave. The euro gained 0.2480 percent to 1.1317, reversing a previous 1.35 percent drop.
Coronavirus news, consumer confidence, and private sector data drove eur usd forecast prediction in the week. Coronavirus’s new wave of Omicron variant damaged consumer sentiment, pushing it lower from -4.8 to -6.8.
But the private sector index remained positive, with service activities jumping to 56.6 from 54.6. The improved service sector propelled the composite production index to 55.8 from 54.2.
Due to the pandemic-related fears, the eurozone’s inflation continued to spiral for the fourth consecutive month. In October, the inflation spiked to a year’s high of 4.1 percent.
But even with the escalating inflation, the European Central Bank played safe. ECB indicated it would not raise borrowing rates soon in a recent meeting.
The recent rise in coronavirus infections has seen many European nations reimpose lockdown measures, further weakening the euro.
Despite the coronavirus concerns, the eurozone’s yearly GDP accelerated by 14.3% in the second quarter.
US Dollar to CHF
The Swiss franc gained 0.4525 against the dollar to 0.9239, as traders sought the safety of traditionally safe-haven currency, Japanese yen, and Swiss franc on Friday.
Also, traders harvested profits following the dollar’s rally in the past weeks. Coronavirus resurgence across Europe and the discovery of the new variant tainted the us dollar to chf exchange rate.
Canadian Dollar Tendency
For the week, the loonie shrank further by 1.1711 percent against the greenback to 1.2791. Previously it lost 0.72 percent to the dollar.
Canada had no significant economic data leaving the Canadian dollar tendency to crude oil prices, strengthening dollar and coronavirus concerns.
Canada witnessed a challenging week as a powerful rainstorm ravaged its economy. And the bad weather is expected to inflict more pains weeks ahead.
Over the week, labor market conditions tightened. Employment records rose by 91 thousand while job vacancies surged above one million.
But the improved labor market was heavily pressured by the emergence of the new coronavirus strain.
Crude oil recent trends in forex market went down, pulling with it the commodity-linked loonie.
Asia-Pacific Currencies
It was week mixed bags for the Asia pacific Currencies. According to the recent trends in forex markets, bulls took control of the Japanese yen leaving Australian and Kiwi dollars to the bears.
US Currency To AUD Dollar
For the week, the Australian Dollar dropped 1.5344% to 0.7123. The coronavirus news and economic data drove us currency to aud dollar performance in the week.
Early in the week, retail sales and the private sector took the stage. Third-quarter private-sector production reduced by 2.2 percent, having rallied by 4.4 in the last quarter.
Australia’s monthly retail sales surged to a record high over the past year. As the country eased lockdown measures, the sales jumped by 4.9 percent, above the 2.5 percent projected by economists.
According to New Zealand’s central bank governor Christian Hawkesby, the country has had a very resilient economy. Notably, employment picked up, and core inflation is within the target range.
Fx NZD USD
Recent trends in forex market indicate the kiwi dollar slid 2.60 to 0.6822 against the greenback. Coronavirus news, trade data, and retail sales primarily drove fx nzd usd rates over the week.
New Zealand’s trade deficit declined to NZ$1.286m from NZ$2.2206m, with third-quarter retail sales reducing 8.1 percent. Previously the retail sales had increased by 3.3 percent.
The overall positive economic data were insufficient to uplift the kiwi from the ravages of the recent coronavirus wave. And then, the Reserve Bank of New Zealand monetary policy inflicted more pain.
Against market expectations of a significant move, the bank increased rates to 0.75 percent. This move ultimately pushed the kiwi dollar lower to be the week’s biggest loser.
USD vs Yen Trend
The Japanese yen reversed the previous loss of 0.09 percent and rallied by 0.59 percent to 113.31. In the week, coronavirus news, inflation figures, and the Private sector drove the usd vs yen trend.
Japan’s manufacturing index improved to 54.2 from 53.2, with the service sector index going up to 52.1 from 50.7. Inflationary pressure also picked up to 0.3 from 0.1 percent.
With the new coronavirus strain concerns, the economic data had little impact on the yen. In negative sentiments, traders mostly prefer the yen over the dollar.
Week Ahead
- Drug manufacturers Giants race to manufacture an effective vaccine against Omicron variant
- Omicron concern and its impact on the forex market
- Economic updates
- Central bank policymakers responses to the omicron virus and inflation hikes
- OPEC + meeting on Thursday
With risk aversions dominating recent trends in forex market, traders ran to the greenback’s safety amidst an improved global economy. The Omicron variant unraveled the forex market overshadowing economic updates, inflationary pressure, and monetary policies.
The dollar surged against other g7 currencies except for the yen and Swiss franc by the end of the week.
A possible explosive week ahead! With the Omicron strain, economic updates, and policymakers meeting, expect volatility in the financial market.
Don’t miss our subsequent analysis of the forex market!