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Bannockburn Global Forex Drivers for the month ahead January 31, 2022 View Online Economic Calendar February 1-6: Lunar New Year (Chinese markets closed) February 2: Central Bank of Brazil February 3: European Central Bank February 3: Bank of England February 4: US & Canadian Employment Data February 10: Central Bank of Sweden February 10: Bank of Mexico February 10: US CPI February 15: UK Employment Data February 17: Central Bank of Turkey February 21: President's Day (US markets closed) February 22: National Bank of Hungary February 23: Reserve Bank of New Zealand February 24: Bank of Korea February 2022 FX Outlook The business and investment climate at the start of the 2022 is being shaped by four considerations. First, the market now sees a more aggressive turn of the Federal Reserve. On Christmas Eve, the market had three hikes for this year nearly priced in. Now, almost five hikes have been discounted. The central banks of England, Canada, and New Zealand are also expected to be more aggressive. On the other hand, the European Central Bank, the Bank of Japan, and the Swiss National Bank are understood to be laggards. The swaps market has swung back and forth about the possibility of a hike by the ECB this year. The adjustment of the monetary policy outlook has contributed to the volatility in the bond and equity markets and the firmer US dollar. Second, at the same time as monetary policy shifts, the virus appears to have slowed growth at the end of last year and is spilling over into early Q1 activity. The German economy contracted in Q4, and 2/3 of the US Q4 growth was due to inventory accumulation. The January US composite PMI fell to 50.8 from 57.0. It has not been lower since July 2020. The eurozone PMI composite fell for the fifth time in six months in January, and Japan’s fell back below the 50 boom/bust level. Third, although China’s economy grew faster than expected in Q4 21, officials have shifted from the deleveraging thrust to more supportive measures, which have included lower rates. New lending is being encouraged, and fiscal initiatives are also expected. Fourth, geopolitical tensions are elevated. Russian troops are threatening Ukraine. North Korea has been very active with missile tests to start the new year. Iran is reportedly drawing closer to nuclear weapon capability. China continues to harass Taiwan by sending war plane sorties into its air identification zone. Click here for the full monthly outlook By: Bannockburn Global Forex 255 East Fifth Street, Floor 8 Cincinnati, Ohio, 45202, United States