IC Markets Asia Fundamental Forecast | 19 January 2022

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What happened in the US session?

US treasury yields continue to see a rise amid expectations of a more aggressive US Fed in tackling the issue of inflation, with the 10- and 5-year notes soaring to fresh two-year highs. 

What does it mean for the Asia Session?

A light-calendared session in Asia is likely to see the overnight theme of an aggressive US Fed linger. The Aussie and Yen remains as the best tags to play the strength on the greenback due to the contrasting monetary policy stances from the respective central banks.

The Dollar Index (DXY)

Key news events today

No major news events.

What can we expect from DXY today?

Despite the lack of first tier currency-specific data releases for the week, the greenback is likely to sustain its gains amid expectations of a reaffirmation of the hawkish lean from the Fed during the upcoming central bank meeting next week.

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 upcoming CPI data set from the UK, with headline year-on-year price increase expected to come in 0.1% higher than the previous 5.1%, may provide the impetus to buy into the precious metal if the data exceeds expectations.

Next 24 Hours Bias

Mixed-to-Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

Australia saw the highest death on record due to the Omicron spread and continues to see an increase in hospitalisation rates to record levels even as daily infections eased slightly. This development is likely to delay any possible changes to RBA’s consistently dovish stance.

The country will report its labour data on 20 January, with an anticipated drop in employment change (expected 60k, previous 366.1k) and an improvement in unemployment rate (expected 4.5%, previous 4.6%).

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 price action between the antipodeans put the Kiwi on par with the Aussie, though the respective monetary policy stances are expected to differentiate the leader as the central banks’ meetings draw nearer, in February.

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-to-Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

BoJ Governor Kuroda commented that the current weak Japanese yen ‘is not a bad thing’ for the economy, following the central bank’s decision to keep monetary setting with rates unchanged at -0.1%.

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

Strong Bearish