Weekly Forex Review & Outlook 28-Nov-2022: USD Stumbles, Unrest in China and Gains for GBP, NOK, SEK, NZD and AUS

A review of last week

The dollar stumbled to a three-month low last Thursday, while the pound and euro took a two-day breather as US traders wound down around the Thanksgiving holiday after reaching recent three-month and six-month highs.

However, there has been some recalibration in the dollar this Sunday, with the unrest in China sending more money the greenback’s way.

Biggest five-day gainers against USD were sterling, both Scandinavian crowns (NOK and SEK) and both Down Under dollars (NZD and AUD).

The USD weakness reflected robust macro data, which each time rekindles hopes that the famous pivot in US monetary policy is imminent. In the past week this included surprisingly strong data durable goods data that allayed some recession worries, as well as the minutes from the November FOMC meeting showing most officials favour slowing the pace of tightening.

Among the big pairs that gained the most among were NOK/USD, GBP/USD and GBP/CAD, followed by NZD/CAD and NZD/USD as the New Zealand central bank became the first among developed economies to re-accelerate the pace of hiking amid continued strength in the labour market there.

This was in contrast with Sweden’s Riksbank slowed its pace of tightening, making the SEK/USD one of the bigger fallers over the week.

Elsewhere, NOK/HKD was a big gainer, along with JPY/HKD and GBP/CNH, all of which were continuing recovery trends from lows in late October.

Week ahead

The coming week will offer plenty more factors to move USD, with clues into the health of the US economy coming fast and furious, including six Federal Reserve speakers, the most influential of which could be Governor Powell letting loose on the subject of the economic outlook, inflation, and the jobs market on Wednesday.

Friday holds the likely macroeconomic highlight of the US non-farm payrolls report, especially with the next Fed policy meeting coming less than a fortnight later.

Before that, the US central bank’s favourite measure of inflation, the US PCE core deflator, is on Thursday, along with personal spending data and manufacturing PMIs.

US consumer confidence numbers are released on Tuesday, along with the Case-Shiller house price index, while Wednesday will see the publication of the latest Fed Beige Book, featuring anecdotal evidence and feedback on the US economy across the twelve Federal Reserve districts.

For GBP, the Bank of England (which holds its next meeting on December 15) is scheduled to publish mortgage and consumer lending numbers on Tuesday, while Nationwide also releases its latest house price survey.

The only other notable UK data is on the Thursday, when the first day of the new month brings S&P Global manufacturing purchasing managers’ index surveys for the US, UK and other major economies.

For EUR, the eurozone inflation figure on Wednesday has a lot resting on it, as the European Central Bank is eyeing price increases as it looks to time when to pivot to smaller rate hikes.

Eurozone unemployment on Thursday will also be closely watching for any signs that the jobs market is softening.

The ECB is holding a non-monetary policy meeting on Wednesday but, like the Fed and BoE, the next full policy meeting is in the week beginning 12 December.

How to manage FX Risk/Exposure?

Understanding your FX risk and exposure is paramount to your bottom line. At Currency Solutions our decicated team of experts can help you manage and understand you exposure or risk.

What does FX Risk/Exposure mean?

There are three types of foreign exchange exposure companies face:

1. Economic exposure
2. Conversion exposure
3. Transaction exposure

In short, FX/forex (foreign Exchange) exposure means the risk that an individual or company takes when executing transactions in foreign currencies.

If a business is looking to make transactions globally or in multiple currencies, it's important that they first identify their exposure to risk in order to put a calculated risk management strategy in place.

FX Risk/Exposure Management - How does it work?

Volatile currency markets can have a huge impact on your profits.

Let say that you set a 2021 price for a product, bought in USD including a 5% profit margin, based on the exchange rate when the pound was strongest.

When the pound weakened, your profit margin would soon erode, and leave you with -2.5% profit - based on the same price, from stock bought at the dollar’s peak.

This fluctuation in price could force you to either absorb the loss or increase your prices, with the knock-on effect of untenable prices in your already competitive market.

We are a payment solutions provider with over 20 years’ experience and expertise in foreign exchange payments Our services inlcude but are not limited to:

• Hedging and FX Strategies
• Best rates for Spot trades
• vIBAN set up
• E-commerce solutions

We know that it can be time-consuming and challenging to keep up with the innumerable ongoing events that continuously affect the global market mood.

Click here for an instant quote or contact us for a free foreign exchange health check, guaranteed to save you money.