The first official trading week of the year was significantly bullish for Sterling exchange rates; with GBPEUR closing the week at 1.1960 and GBPUSD closing the week at 1.3584 (After a very weak NFP reading). So far, Sterling is the best performing currency of 22 (Time will tell how long this lasts) but this is mostly due to the latest research about the Omicron variant and how the UK Government has handled it- research is showing that this variant is less severe, and the fact that the UK Government did not decide to apply any restrictions has been seen as a big reason for strength in the UK.
It seems globally, that fears of the new variant will be coming to an end over the next 30-60 days, which means investor focus will begin shifting now- the main theme of this year will be around interest rates, and the first we are expecting is the BoE to raise rates again in February, which it seems traders are already positioning for- with more to follow through this year (This part I am unsure about.)
The major theme last year was rising inflation- and we began to see crazy rates of inflation all around the world- many would argue that Central Banks acted too late on this, as we have already seen price rises in pretty much every sector, but energy is where we have seen it the most. In 2022, one outside bet that I am making is that inflation may actually begin to come down, not due to interest rate rises, but due to demand dwindling due to the rise in prices- just an idea at this stage but one worth noting- generally, if the market agrees that something will happen, it probably won’t.
Generally this year I am expecting to see continued U.S Dollar strength, the Pound to gain more bids as the year goes on, and the Euro to be the weaker currency out of the trio- this being said, if you are trading EURUSD, it will be worth being nimble this year at any points the US Dollar weakens.