IC Markets Asia Fundamental Forecast | 14 October 2021

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What happened in the US session?

The US FOMC meeting minutes saw plans laid out for tapering of asset purchases by $10 billion in treasuries and $5 billion in mortgage-backed securities. The process of tapering would be initiated either in mid- November or mid- December.

The US CPI for September rose to 0.4% (expected 0.3%, prev. 0.3%). The US Fed retains the view of inflation as being transitory due to supply chain bottlenecks and elevated energy prices.

What does it mean for the Asia Session?

A rise in the US PPI (expected 0.6%, prev. 0.7%) would reaffirm a scenario of a stagflation, following the month-on-month increase in the US CPI. The risk of a persistent inflation rather than a transitory one viewed by the US Fed may be altered if upcoming inflation data stays elevated.

The Dollar Index (DXY)

Key news events today

PPI m/m, 1230 GMT

What can we expect from DXY today?

Elevated inflation risks and the latest meeting minutes with details on the tapering process from the US central bank would likely see the greenback regaining strength. The US Fed did not show concern over the recent mixed US jobs report.

Central Bank Notes:

  • Tapering likely to start in November, December; end in mid-2022
  • Pace of reduction is $10b in treasuries and $5b in MBS
  • Sees one hike in 2022, three hikes in 2023

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

The precious metal is likely to retain its gains on the theme of a stagflation, where a period of rising inflation is combined with a decline in the GDP. A higher-than-expected US PPI data due for release later today would reaffirm the scenario.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

Employment Change, 0030 GMT

Unemployment Rate, 0030 GMT

What can we expect from AUD today?

The somewhat balanced jobs data, with employment change taking a bigger than expected hit while unemployment rate faring better than expected, point to a mixed view for the Aussie. The plan for the country to re-open its international border from November should continue to support its recent strength against the greenback.

Central Bank Notes:

  • Asset purchase programme intact until February 2022
  • Unlikely to raise current record low rate of 0.1% until 2024

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?

With a relatively light calendar until the CPI report on 18 October, one notable mention is that the latest Prelim ANZ Business Confidence showed a third consecutive decline to -8.6 (prev. -7.2) for the month of October.

Central Bank Notes:

  • Official Cash Rate hiked by 25bps on 6 October, stands at 0.5%
  • Will continue to reduce monetary policy stimulus
  • Future moves contingent on inflation and employment.

Next 24 Hours Bias

Weak Bearish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

A continuation of a bearish pressure on the Yen is justified by current economic conditions in the country and monetary policy directives. Neither the Japanese government nor the central bank has translated the threat of intervention into action.

Central Bank Notes:

  • Lowered assessment on exports and output amid supply bottlenecks in Asia
  • Willing to ease monetary policy further without hesitation, if required

Next 24 Hours Bias

Weak Bearish