IC Markets Asia Fundamental Forecast | 25 November 2021

IC Markets No Comments

What happened in the US session?

The latest US FOMC minutes shows that members are in favour of increasing the pace of tapering, though an emphasis is made again that an end of the asset purchase programme does not constitute an immediate rise in fed funds rate.

What does it mean for the Asia Session?

Strength in the greenback is likely to abate heading into the US Thanksgiving holiday, following the release of the highly anticipated FOMC meeting minutes. With a relative light calendar today, moves are likely to be driven by the technical crowd that can be short-lived if prices move against the overarching themes.

The Dollar Index (DXY)

Key news events today

Bank Holiday

What can we expect from DXY today?

The latest hawkish FOMC minutes overshadowed the relatively dovish data releases which saw the latest quarter-on-quarter preliminary GDP at 2.1% (expected 2.2%, prev. 2.0%) and month-on-month Core PCE Price Index at 0.4% (expected 0.4%, prev. 0.4%).

Central Bank Notes:

  • Taper at the preset pace of US15 billion per month from mid-November
  • Emphasised clear divide between tapering and rate liftoff
  • Next meeting on 15 December 2021

Next 24 Hours Bias

Mixed

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

The latest US month-on-month Core PCE Price Index came in alignment with expectations, reaffirming the central bank’s message that elevated inflation seen currently is likely to be transitory.

The duration of this inflation period remains elusive, however, thus adding to the appeal of the precious metal as the commodity price reaches a technical support area.

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 upcoming data releases on Private Capital Expenditure and Retail Sales towards the end of the week are not expected to rock the boat in terms of monetary policy directives, which is expected to remain dovish going into next year.

Central Bank Notes:

  • Plausible that the first interest rate increase will be not before 2024
  • Will not raise rates to control house prices/ inflation
  • Next meeting on 7 December 2021

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 expected increase of 25bps in the OCR is fulfilled but the forward guidance is perceived to be less hawkish compared to before when Covid plague the nation into lockdown mode.

The latest word from RBNZ Governor Orr stated that capacity pressures are currently widespread in the country as the economy is running above its potential. Rate hikes remain as the preferred tool to counter inflationary pressures.

Central Bank Notes:

  • Will continue to reduce monetary policy stimulus
  • Future moves contingent on inflation and employment.
  • 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?

Amid overarching monetary policy divergences from respective central banks, reinforced by the latest US FOMC meeting minutes, the USD/JPY pair is still expected to strive towards the 2016/2017 highs around the 118.50 region.

Central Bank Notes:

  • Lowered FY2021 GDP projection to 3.4% (prev. 3.8%); core inflation projection to 0.0% (prev. 0.6%)
  • Governor Kuroda stated that current weakness in Yen reflects the fundamentals
  • Next meeting on 17 December 2021

Next 24 Hours Bias

Weak bearish