The Worst Year Since The Brexit For The British Pound (GBP) But For The US Dollar Look Like The Best Since 2015
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The Fed and central banks around the world have been raising interest rates to fight soaring inflation stemming from supply chain problems related to the COVID-19 pandemic and an energy crisis related to oil producer Russia's Ukraine invasion.
As a result, all three major averages registered their biggest one-year percentage declines since the 2008 financial crisis.
Along with domestic worries, investors around the world have also been monitoring China, the world's second biggest economy, for signs of weakness.
The dollar was on track to record its best year since 2015 on Friday on the last trading day of the year, dominated by Federal Reserve rate hikes and fears of a sharp slowdown in global growth.
Since March, the Fed has raised interest rates by a total of 425 basis points in an attempt to stem rising inflation.
The last trading week of the year is behind us. How the major currency pairs fared.
GBP/USD
The cable pair ended the last week of the year in bullish sentiment. The week the GBP/USD pair started trading below $1.21 at 1.2050. The pair traded mostly in the 1.20-1.21 range. The highest level of the pair reached the level above the upper limit of the crossbody, i.e. 1.2113. The highest was at 1.2003 and came before the weekly high.
The British pound ended 2022 nearly 11% lower at $1.2, its worst year since the Brexit vote in 2016, amid a general cautious mood regarding the economic outlook for 2023, political uncertainty, and as a hawkish Fed sent the USD higher.
The pound recovered since then after Rishi Sunak became the new prime minister but remains under heavy pressure, as the recession is looming while the Bank of England appears more dovish compared with its peers.
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EUR/USD
EUR/USD traded above 1.06 but below 1.07. The pair started the week at 1.0630 and ended at 1.0712. The highest level reached at the end of the trade exceeding 1.07. The lowest level was still above 1.06 - 1.0611.
AUD/USD
The Australian pair, similarly to the euro pair, managed to break the upper level of resistance, which was at the level of 0.67. Thus, the couple ended the week on the highest level. The lowest level was at the beginning of the week (0.6699). Then the pair received support from information from China and thus grew above 0.67.
USD/JPY
The USD/JPY pair traded mostly around 132. It peaked above 132 at 134.420 and the low was below 131 (130.8210). The pair ended the last week of the year at 131.1050
The Bank of Japan (BOJ) is considering raising its January inflation forecast to show price growth close to its 2% target for fiscal years 2023 and 2024, the Nikkei reported on Saturday.
This month, the BOJ launches an extension of its 10-year yield caps, which is officially intended to straighten out bond market disruptions, but some analysts see them as a way out of ultra-loose monetary easing.
Japan's core consumer prices excluding fresh food in November hit their highest since 1981, according to last week's government data.
The BOJ will release its latest quarterly growth and price forecasts after its next policy meeting on Jan. 17-18.
Source: finance.yahoo.com, investing.com, dailyfx.com
