News & analysis

Our expectation of sustained USD strength throughout December proved correct as the arrival of Omicron and the risk it posed towards global growth conditions heading into 2022 kept risk conditions tentative. In addition, progress in the US labour market recovery and a more persistent inflationary backdrop resulted in a hawkish pivot from the Federal Reserve at December’s meeting, with the US central bank doubling the pace of its QE taper and signalling three rate hikes in 2022. Outside of the US, events came thick and fast in December, but the idiosyncratic developments did little to derail our forecasts for the month within both G10 and EM spaces. Looking ahead to 2022, our forecasts have been adjusted to take into account the new sensitivities of central banks to inflation, continuing virus risks and the likely slowdown in growth in Q1. Risks over the 12-month horizon are plentiful, with the most notable ones outlined in our ‘2022 themes to watch out for’ document released in January. These range from political and geopolitical risk to fiscal consolidation and terminal rates. In the short-term, Omicron risk continues to dominate as policymakers in major economies conduct a balancing act in order to mitigate the health and economic impacts.

You can read our January 2022 FX Forecasts report here:



Simon Harvey, Senior FX Market Analyst
Ima Sammani, FX Market Analyst



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