Hryvnia’s gradual decline amid investors’ silence: the week forecast

Maksym Oryshchak

Analyst at the Center of Exchange Technologies

The news background for the coming week will be restrained. First, the beginning of the year is never eventful. Secondly, on a global scale, the most important events took place in December—the decision on Brexit between England and Europe, presidential elections were held in the United States, a vaccine against COVID was found.

For Ukraine, it has long been determined that a full lockdown would start on January 8. So, cafes, fitness rooms, and schools with higher education institutions have been closed until January 24. Earlier in Ukraine, a weekend quarantine was in effect, but it was canceled after the morbidity statistics improvement. That is, there will be no more important news than the COVID situation and the incidence growth rate.

In the world, the investment community is experiencing a situation with a potential increase in stimulating the US economy. Thus, the US Democratic Party has gained full control of Congress, and this paves the way for further stimulation.

The potential new $750 billion stimulus package will be approved between mid-February and mid-March and distributed almost immediately thereafter. Under the influence of such sentiments, the market will start the trading week.

This may be the reason for the American indices downward correction after they have reached new historical highs, and the US dollar index, on the contrary, may rise slightly before another wave of sales to the level of 88.9.

Investment gold has been falling for the last 4 days, and losses for the asset amounted to about 7% to the level of $1820 per troy ounce. After the sales, without a strong news background, a moderate price recovery can be expected.

From the statistics of the current week, let’s pay attention to the following: on Wednesday, January 13, we will find out the change in inflation in the US for December.

Also, The Fed's Beige Book will be published, and ECB President Christine Lagarde will discuss economics in an online conference. Philadelphia Federal Reserve Bank President Patrick Harker, in turn, will discuss the economic outlook in 2021.

On Thursday, January 14, the speech of the President of Atlanta FRB Rafael Bostic, the president of Boston FRB Rosengren will be interesting. In the middle of the day, the protocol of the ECB’s December meeting will be released, and later, at the American trading session, the monthly OPEC report on the oil market will be published.

Friday will traditionally be the day of the data release from the US and rating agencies. The US is to publish December industrial production on January 15, December producers’ prices, and December retail sales.

Results of JPMorgan Chase & Co., Citigroup Inc. for the Q4 will be published the afternoon. for the fourth quarter. S&P Global Ratings will publish ratings of Andorra, Russia, Kuwait. Fitch Ratings will publish the UK rating. Moody's Investors Service may publish Finland rating.

This news information provides insight into what assets will be more volatile (where a sharper price change can be expected due to the news background). Such data is relevant for investors, traders, and for those who convert currencies.

The hryvnia, for example, under the pressure of the current lockdown will continue its gradual devaluation, but without the levels of 30 UAH per $1.

Note that economic activity in January is always not high, and it means that lockdown does not exert much pressure on economic activity, but there are no hryvnia growth factors either. Therefore, under the pressure of information that there is no news from creditors, the hryvnia will continue to decline moderately in relation to the dollar and euro.