The British pound kicked off 2022 in high gear as risk aversions gripped trading market news. Also, the Greenback and loonie roared higher from the risk versions, with the kiwi and Aussie dollars hitting the rocks.
Traders returned from the holiday season to find inflation and interest rates spiking, which affected the forex market. Additionally, the development of Omicron variants drove the market.
The Fundamentals
High-Interest Rates
The New Year saw traders move into new monetary policy waters. Most central banks in G7 increased interest rates, while the few remaining intend to do so soon. But the central Bank of Japan and the European central bank maintained a dovish stance.
Traders sold high-risk assets in response to hawkish monetary policies. As a result, the dollar and other haven currencies gained traction.
Inflation
Traders fear the escalating prices at the consumer, wholesale, and business levels could throttle economic activities. The increasing prices have seen the G7 central banks reduce pandemic-induced support and change their monetary policies.
For instance, to counter the rising inflation in America, kashkari, FED’s member, supports a rate hike sooner this year.
Omicron Threat
As the world ushered in another year, it also recorded an enormous surge in coronavirus infections. But there is hope. Many nations have emerged from the fourth round of covid -19 related restrictions, and research has shown omicron is less severe.
Economists, however, still fear the rising cases could hinder economic activities, especially the labour market and supply chain. For instance, the surge in Omicron infections has led to flight cancellations and reduced services and working hours.
Crude Forecast
On Friday, oil prices reached their highest levels in two months. Kazakhstan’s unrest and Libya’s reduced production affected crude forecast. OPEC’s inability to deliver 400 thousand barrels per day further aggravated the situation.
G7 Economic and Fundamental Analysis
Table: g7 currencies performance summary
| Currency pair | 1st Jan 2022 | 7th Jan 2022 | Average price | Percentage change | Remarks |
| USD | 96.211 | 96.250 | 96.143 | 0.135 | increase |
| GBPUSD | 1.3471 | 1.3585 | 1.3534 | 0.4139 | increase |
| EURUSD | 1.1294 | 1.1359 | 1.1308 | 0.0792 | increase |
| USDCHF | 0.9191 | 0.9212 | 0.9184 | 0.7235 | increase |
| USDJPY | 115.32 | 115.55 | 114.79 | 0.41 | increase |
| USDCAD | 1.2741 | 1.2644 | 1.2715 | 0.0792 | drop |
| AUDUSD | 0.7191 | 0.7178 | 0.7197 | 1.1295 | drop |
| NZDUSD | 0.6784 | 0.6748 | 0.6783 | 0.6448 | drop |
US Dollar Latest News
The US kicked off 2022 with a phenomenal spike in coronavirus illnesses. Yet, despite the coronavirus surge, the Greenback rose 0.135 percent to 96.250, reversing the previous week’s 0.36 percent drop.
The dollar started the week on a high note, but a 0.6 percent drop on Friday reduced most of the week’s gains. While the hawkish FOMC meeting on Wednesday uplifted the dollar, Friday’s NFP numbers pressured it.
The production sector received some relief as supply constraints eased. Besides, ISM manufacturing index dropped to 58.7 from 61.1. The drop in ISM reflects an improved delivery time, an enormous relief to manufacturers.
Service sector delivery time also improved as the index fell by 11.8 percent to 62.9, the lowest level in eight months. However, some negative economic data weighed on the dollar. For example, job openings dropped to 10.562 million from 11.091 million.
And weekly jobless claims rose to 207 thousand from 200 thousand. The FOMC meeting midweek supported the dollar. The fed reserve adopted a hawkish monetary policy that fueled the dollar’s demand.
The FED showed the need to lift interest rates sooner than previously planned in the minutes. On Friday, employment numbers wiped some gains made earlier in the week. According to the latest US dollar news, employment grew by 199 thousand less than expected.
Despite the unimpressive numbers, the unemployment rate fell from 4.2 percent to 3.9 percent. Meanwhile, the participation rate was unchanged at 61.9 percent.
Dollar to Pound Forecast
The pound closed 2021 in high gear and maintained the same momentum this year. For the week, the sterling pound surged 0.4139 percent to 1.3585. In the last week of 2021, the cable gained 1.09 percent.
In December, the bank of England raised interest rates from 0.1 to 0.25 percent. The BoE increased the rates when the omicron concerns were still reasonably uncertain. A positive private-sector index drove the dollar to pound forecast earlier in the week.
While the manufacturing index rose to 57.9 from 57.6, services climbed to 53.6 from 53.2. The improvement in the private sector pushed the composite index to 53.6 from 53.2. Boris Johnson hinted he would not reintroduce more restriction measures despite high omicron cases in the UK.
Euro Fx News
Over the week, the euro declined 0.0792 percent to 1.1359. However, according to euro fx news, the euro rallied 0.45 percent the week before. On the economic front, the Private sector, inflation, and GDP drove the euro’s performance.
While the manufacturing sector supported the euro, the service sector disappointed. The manufacturing index shrank to 58.0 from 58.4, and the services index fell to 53.1 from 55.9.
The drop in manufacturing and services lowered the composite index to a nine-month low, from 55.4 to 53.3. Germany’s retail sales, industrial production, and positive unemployment numbers had minimal impact on the euro.
Also, Germany registered a drop in the trade surplus. Meanwhile, inflationary pressure rose in Germany, Italy, and France-eurozone’s powerhouses. This pushed the eurozone’s annual inflation to five percent from 4.9 percent.
Analysts believe the spiking rates could compel the ECB to shift its stance on rates in line with the FEDs move.
CHF Currency Outlook
According to investing.com, the Swiss franc lost 0.7235 to 0.9212 against the Greenback. Economic updates, omicron concerns, and risk aversions influenced chf currency outlook.
Switzerland posted positive economic updates which uplifted its currency. The manufacturing index crawled to 62.7 from 62.5, and the consumer price index declined 0.1 percent.
Retail sales impressed, surging 5.4 percent. But unemployment figures disappointed with rates going higher to 2.6 percent from 2.5 percent.
Dollar Versus Canadian Dollar
Trading market news shows the loonie gained 0.0792 percent to 1.2644. In the week before, the Canadian dollar rallied 1.39 percent. Early in the week, positive economic data supported the loonie.
First, it recorded 55 thousand new jobs, resulting in a slight drop in the unemployment rate to 5.9 percent from six percent. In the previous month, Canada had recorded 154 thousand new jobs.
Second, its trade surplus expanded to C$3.13billion from C$2.26billion. But a sharp decline in the production sector was the only negative data for the US dollar versus Canadian dollar.
According to trading market news, Canada’s Ivey production index tumbled to 45.0 from 61.2. Global pickup in crude oil prices provided much-needed support for the loonie. Investing.com data shows crude oil prices jumped to over $78 per barrel.
Asia-Pacific Trading Market News
The bears took control of Japanese yen and Kiwi and Aussie dollars in the Asia-Pacific region.
Aud Currency Latest News
According to aud currency latest news, the Aussie dollar was the worst performer of the week, sliding 1.1295 percent to 0.7188. For the week, Australia had no economic data to support its currency. This left the performance of the Aussie to market sentiments.
As trading market news turned negative, traders abandoned the Australian dollar. Also, the spiking omicron cases coupled with the restriction measures weighed on the Aussie dollar.
NZD News Prediction
Similarly, New Zealand had a quiet week on the economic calendar, leaving risk aversion measures to drive nzd news prediction. The Kiwi Dollar closed the week 0.6448 percent lower to 0.6748 against the Greenback.
USD JPY Current News
The Japanese yen tumbled yet for another week. After falling 0.61 percent, the yen fell further 0.41 percent to 115.55. On the economic front, inflation, the private sector, and household spending dominated usd jpy current news.
According to trading market news, Japan posted mixed economic data, which could not provide proper direction for the yen. First, household spending and services fell, weighing heavily on the yen.
While household spending slid 1.2 percent, the service sector index dropped to 52.1 from 53.0. Rising Inflation data supported the yen. Tokyo’s annual inflation rate picked up to 0.5 percent from 0.3 percent.
Week Ahead
In the coming week, we expect the following fundamentals to affect forex trading:
- Coronavirus developments and their related effects.
- Inflation data, especially the US yearly pressure, which is expected to hit 7.1 percent
- Economic updates
Final Thoughts
Except for the euro, pound, and loonie, the US dollar gained against other G7 currencies. The FED meeting report featured heavily in this week’s trading market news and impacted the forex market.
Traders now firmly believe the Omicron variant would not derail the global economy. Also, it may not compel central banks to take aggressive action.
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