IC Markets Asia Fundamental Forecast | 31 December 2021

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What happened in the US session?

ECB policymaker Holzmann hinted at a less dovish monetary policy in 2022. As for the US, the latest Initial Jobless Claims saw a drop to 198K (expected 205K, prev. 206K) in the week ended December 24.

What does it mean for the Asia Session?

Australian, New Zealand, and Japanese markets will be closed due to the New Year’s Eve holiday. Volume is expected to be thin in this last day of the year.

The Dollar Index (DXY)

Key news events today

No major news events.

What can we expect from DXY today?

The latest positive second-tier data out from the US and the overarching hawkish Fed is likely to limit downside swings in the greenback induced by year-end position adjustments.

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 bearish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

Some late weakness in the US dollar and a sustained decline in the buck from year-end position adjustments is likely to see limited gains on the precious metal.

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?

Following the national emergency cabinet meeting, PM Scott Morrison did not announce tighter measures amid the spike in Covid infections in the country.

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 bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

No new currency-specific data or news flow is registered for kiwi on this last day of the year. Subdued interest in the New Zealand dollar is likely.

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?

The country saw infections with Omicron registered in 22 out of 47 prefectures, just one month after the first domestic case was confirmed.

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