Quarterly Currency Market Forecast

A review of Sterling, Euro, US Dollar, Canadian Dollar Australian Dollar and New Zealand Dollar's recent performance. Plus expected ranges and key factors likely to affect their performance over the next 12 months

Published: 19 January 2022


The global recovery from the pandemic has been impressive, led by China, the US, UK and some developing economies. But the rebound hasn’t been without problems, as the global rebound in demand hasn’t been met with a similar increase in supply. Problems with the supply of materials and labour have led to a sharp increase in inflation. This has been a major headache for the central banks of major economies. They continue to suggest these increases will be temporary, but their conviction in this belief has waned as ‘temporary’ has dragged on. Some central banks have been more relaxed about inflation increases, such as the ECB, whilst others have already started raising rates as in New Zealand, whilst many more are laying the groundwork to do so.

Before we call an end to the pandemic, some countries are still struggling substantially with the latest wave of the Omicron variant, with cases in the US hitting new record levels. Across Asia, the cases have started rising very rapidly, though further shutdowns and disruptions to supply chains haven’t yet been put in place. This remains a significant risk at the start of 2022.

The increase in global economic activity of 5.7% in 2021 still leaves the economy slightly below 2019 levels. Many expect 2022 to be more challenging, with supply chain disruption likely to continue well into the year. Some of the inflation issues around energy and heavy industry may settle down. We expect global growth to slow to around 4% in 2022.

Greg Smith, in the latest podcast for the Business Perspectives Series,  discusses the key factors featured in this report. To listen to the podcast, click on the link below.


GBP | United Kingdom

Recent data shows that the UK economy regained its pre-pandemic size at the end of November. Supply disruptions, falling unemployment and rising inflation will continue to be themes for the year, with the rate hike by the Bank of England unlikely to be the last.

EUR | European Union

The European Union has had a tough winter so far with Covid restrictions as a result of the Omicron wave. The Economy finished the year strongly with expectations of a positive year, though the ECB may have to take some action on rapidly increasing inflation.

USD | United States

The US has been working on many fronts, internationally with Russia and China, and domestically with an increased fiscal spending plan. The economy has been growing strongly, prompting action from the Fed, though masses of Covid cases may halt the recovery.

AUD | Australia

Australia has been trying to return to normal with reduced restrictions and higher vaccine rates. It hasn’t been plain sailing, with current Omicron cases at record levels. The economy has been making up ground, with inflation lower than most major economies.

NZD | New Zealand

New Zealand is now among a small number of countries with major travel restrictions in place and relatively low levels of Covid cases. With vaccinations now at high levels, there is a path to normalisation with the central bank raising rates as inflation picks up.

CAD | Canada

The increase in oil and commodity prices has benefitted the loonie somewhat. With the potential for further rises, we could see
further strength in the first part of the year, with inflation and interest rates likely to head higher.


Monetary Policy, Inflation (caused by employment and disruption) and Covid will be key themes for the year.

Should inflation be the catalyst for significant monetary tightening? Given the significant fall in global economic output in 2020 and a decade of undershooting inflation in most developed economies in the past decade, it shouldn’t be. What impact will rising rates have on supply disruptions and labour shortages?

The US has bounced back the quickest of the major developed nations and yet will be later in raising interest rates compared to the UK and New Zealand. This year is likely to be challenging for monetary and fiscal authorities. Growth is likely to slow to similar rates to those enjoyed pre-pandemic.

Covid is moving from pandemic to endemic, but we’re not there yet and this year is likely to be volatile again, with countries affected in different ways. Throw in a handful of geopolitical risk, with the ongoing sabre-rattling of Russia and China and there are plenty of potential sources of risk in the year ahead.

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