IC Markets Asia Fundamental Forecast | 14 January 2022

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What happened in the US session?

The US Initial Jobless Claims came in worse than expected at 230K (expected 199K, prev. 207K). Meanwhile, the country’s month-on-month PPI was lower than expected at 0.2% (expected 0.4%, prev. 0.8%).

What does it mean for the Asia Session?

The corrective downward move on the greenback is likely to abate, influenced by the less hawkish US Fed chair’s view on the balance sheet run-off. The Kiwi is likely to stay firm during the dollar retaliation. The RBNZ remained consistently hawkish since late last year.

The Dollar Index (DXY)

Key news events today

Core Retail Sales m/m, 1330 GMT

Retail Sales m/m, 1330 GMT

What can we expect from DXY today?

Fed’s Harker stated in favour of balance sheet normalisation after a period of sustained interest rate increases while fellow member Evans holds a similar view of up to four interest rate hikes in 2022. Other voices from the Fed speak reiterated concerns over inflation while their view on maximum employment status differs.

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 Fed speak casts the spotlight back to inflation as being the main determinant for raising rates, up to four times, in 2022. The precious metal is expected to have further gains capped and reverse before the next Fed meeting on 26 January.

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The gains on the Aussie, driven mostly by the weakness on the greenback, is likely to be capped as the respective central bank meetings draw near. The overarching monetary policy directives concur.

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 RBNZ’s hawkish monetary policy directives should re-emerge soon to sustain the Kiwi’s break above a six-week range. Otherwise, the lack of key currency-specific data releases and news flows could see the bullish effort diminished.

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

Mixed

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

Amid more than 10,000 daily Covid cases recorded for the first time in four months, Japan’s Chief Cabinet Secretary Matsuno stated any requests on expanding Covid measures will be managed in a swift manner, following the country’s coronavirus alert system rising to the second-highest level.

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 Bearish