IC Markets Asia Fundamental Forecast | 28th October 2021

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What happened in the US session?

A batch of mixed developments may produce headwinds for the US Dollar as it puts pressure on the Federal Reserve to delay its exit strategy.

The latest US Conference Board consumer confidence posted a surprise increase to 113.8, above expectations looking for a drop to 108.3. Meanwhile, both the present situation index and expectations index regarding business and labour market conditions both rose in October.

What does it mean for the Asia Session?

A lack of prominent economic event risk during Friday’s Asia Pacific session may place the focus for currencies on general market sentiment. Given the decline in Wall Street futures, this could set the stage for further gains in the US Dollar and Japanese Yen. This may come at the cost of the Australian and New Zealand Dollars.

 

The Dollar Index (DXY)

Key news events today

No major news

What can we expect from DXY today?

The U.S. dollar edged up on Tuesday in narrow-range trading as markets awaited news from upcoming central bank meetings that might spark volatility. Report showed that U.S. consumers were more confident about the economy than expected, the dollar index DXY rose modestly and was up 0.1% at 93.9280 at 3:30

Central Bank Notes:

  • Tapering likely to start in November, December; end in mid-2022
  • Pace of reduction is $10b in treasuries and $5b in mortgage-backed securities
  • Sees one hike in 2022, three hikes in 2023
  • Next meeting on 3 November

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

All eyes on the upcoming US central bank meeting on Thursday. For now, gold will continue trading relatively flat till further direction provided by the upcoming central bank meetings. Fears of inflation continues to plague the market

 

Central Bank Notes:

  • Gold prices’ recent gains have come on the back of rising inflation expectations outpacing bond yields.
  • The final week of October will see several central bank meetings and initial 3Q’21 GDP readings, putting focus on how policymakers are planning on dealing with persistently higher inflation in context of a weaker growth environment.

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 annual inflation rate in Australia fell to 3.0% in Q3 2021 from a 12-1/2-year high of 3.8% in the previous period and compared with market estimates of 3.1%, . It could lead to a monetary policy tightening race, driving up rates. How quickly the RBA responds may determine yields across the curve, and this can play a role in the attractiveness or otherwise of the Australian Dollar.

 

Central Bank Notes:

  • Asset purchase programme intact until February 2022
  • Unlikely to raise current record low rate of 0.1% until 2024
  • Next meeting on 2 November

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

New Zealand Bank Holiday

What can we expect from NZD today?

NZD/USD looks poised to test the monthly high (0.7219) as it carves a fresh series of higher highs and lows, but the update to the Conference Board’s Consumer Confidence survey appears to be dragging on the exchange rate as the index climbs to 113.8 from 109.8 in October versus forecasts for a 108.3 print.

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 meeting on 24 November

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?

The Japanese currency was also hampered by expectations that the Bank of Japan (BOJ) will signal a strong commitment to maintaining its easy monetary settings this week even as many other central banks around the world look to tighten their policy to stem inflation.

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 meeting on 28 October

Next 24 Hours Bias

Weak Bearish