The Year Ahead for FX: A Fine Balancing Act
During the webinar, Adam looked ahead to 2022 and discussed the key trends and influences that are likely to impact on the major foreign exchange rates for the next year – focussing especially on the UK pound, the US dollar and the Euro.
Amid the post-pandemic fallout, attention on the prospects for economic growth, inflation and monetary policy remained front and centre. The threat of another Covid outbreak and lockdown will no doubt remain ongoing risks.
Among the questions Adam answered are: what is the outlook for economic growth next year among the major economies? Will capacity bottlenecks lead to a sustained rise in inflation? What does this mean for interest rates? And how are the major FX rates likely to respond?
With inflation hitting multi-years highs, policymakers are getting nervous. How much should central banks tighten monetary policy? If they don’t do enough, they risk inflation expectations becoming entrenched. But tightening policy too much, too soon, risks potentially jeopardising the nascent economic recovery.
It’s a fine balancing act – an act that will likely determine which of the major currencies will prove the most, and least, resilient next year.