IC Markets Asia Fundamental Forecast | 13 January 2022

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What happened in the US session?

The month-on-month US headline CPI came in higher than expected at 0.5% (expected 0.4%, prev. 0.8%), bringing the annual figure to 7.0% year-on-year and registering a 40-year high as a result.

What does it mean for the Asia Session?

Despite the highest inflation seen in recent times, the excessive optimism from the US dollar hawks is likely to continue to abate following Fed Chair Powell’s less hawkish take on the balance sheet run-off during his latest speech. 

The Dollar Index (DXY)

Key news events today

PPI m/m, 1330 GMT

What can we expect from DXY today?

Fed’s Bullard expects four rate hikes in 2022 amid an elevated-prices environment, with the first of the few hikes likely to take place at the March central bank meeting. 

Fellow policymaker Mester chimed in on the high inflation, stating that the underlying sources are not just from supply chain and wage issues, but from a wider spectrum.

Central Bank Notes:

  • Taper pace increased to US30 billion from January; end in March 2022
  • Emphasised clear divide between tapering and rate lift-off
  • Next meeting on 26 January 2022

Next 24 Hours Bias

Weak bullish

Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

The latest inflation data set from the US, seeing its highest in 40 years, and the weakness on the greenback due to over commitment from the bulls, is likely to see the precious metal sustained its gains prior to the upcoming US PPI (expected 0.4%, prev. 0.8%).

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The lack of first-tier currency-specific data releases and news flow from the country is likely to see its gains lag other risk currencies amid the broad weakness in the US dollar.

Central Bank Notes:

  • Kept Cash Rate at 0.1%. and weekly bond purchases of AUD 4 billion per week until mid-February 2022.
  • A slower progress towards employment and inflation goals warrants a taper in February and review again in May.
  • Consider to raise rates only until actual inflation is sustainably within the 2%-3% target range. 
  • Next meeting on 1 February 2022

Next 24 Hours Bias

Weak bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The Kiwi is still expected to take over as the leader among the antipodeans underpinned by the overarching RBNZ monetary policy directives and relatively less severe Omicron situation in the country. 

Central Bank Notes:

  • Need to raise OCR to 2.6% by 2024, pending economic outlook
  • Downgrades GDP in 2022 and unemployment rate; upgrades to CPI and GDP in 2023
  • Considered a 50bps rate hike at the latest meeting but sees 25bp as a steady approach
  • Next meeting on 23 February 2022

Next 24 Hours Bias

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

Following BoJ Governor Kuroda’s comments that the economy is expected to recover as impact from the coronavirus eases, the central bank raised assessment for all of the country’s regions.

Central Bank Notes:

  • Retains its ultra-accommodative strategy
  • To scale back emergency pandemic relief funding from March 
  • Japan’s economy has picked up it does still remain in a severe situation due to the COVID-19.
  • Next meeting on 17 January 2022

Next 24 Hours Bias

Weak Bullish