How might the resurgence of the pandemic affect the global economic recovery?
While the global economic recovery is continuing, the pandemic seems to be having a resurgence. The cracks and flaws opened up by COVID-19 are looking more persistent—short divergences are expected to leave lasting imprints on medium-term performance. While third world countries struggle for vaccine access and supply chain disruption are a widespread problem to the first world, we can expect this and early policy support to be the drivers of the gaps.
Some key forecasts on certain sectors may be able to shed some light on what is to come in the year ahead.
The Euro area economy is bouncing back despite continued uncertainty related to the COVID-19 pandemic and supply bottlenecks and with the Omicron Variant on the rise, there is still a lot of uncertainty. Economic activity is expected to grow slowly and then moderately in 2023.
The expected outlook for EUR/USD, should be some consolidation between 1.15 and 1.13 for the first quarter. After consolidating the price may buy until 1.15, after which it should range between 1.15 and 1.12 for Quarter 2 and 3. It is likely that the price will break out of the range and sell off until 1.05 for Quarter 4.
While GBP/USD the first-quarter price should rally until 1.34, if the price then holds in that area, it could sell off until 1.29 for quarters two and three. It is likely the sells will then continue until 1.26 for the last quarter.
The United States economic growth is expected to be moderate in 2022 due to a less favourable support effect. That said, activity should remain upbeat amid healthy household consumption and strong infrastructure spending. Uncertainty over new Covid-19 variants and ongoing tense relations with China pose downside risks.
Within this risk on/off-market, we could see USD/JPY sell until 112 for the first quarter, if that price then holds the buys should continue for quarter two and three until 115. If the buys are strong quarter-four should continue the buys until 117.5.
We have seen significant growth in the Cryptocurrency sphere, with a focus on some key drivers like Bitcoin, Etherium, Litecoin and Dogecoin. More countries are embracing cryptocurrencies and making long term plans to include them in the general economy. Certain large players like China are still resisting the free flow of cryptocurrencies, and look to control the market.
S&P 500 has seen some significant gain during 2021 and the outlook for 2022 is still in a general bullish direction. There are fears that it may be overextended and due for a pullback, but should be able to resume its general direction.
While this is not set in stone and is dependent on continued policy support, an ease in vaccination supply shortages and supply chain disruption is the key to consumer heavy economies.
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