IC Markets Asia Fundamental Forecast | 9 December 2021

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What happened in the US session?

BoC kept its overnight rate at 0.25%, with reiteration to keep rates low until the economic slack is absorbed. The central bank noted the impact of Omicron on the supply chain, which was constrained prior to the discovery of the new covid variant, would continue to inhibit economic growth.

What does it mean for the Asia Session?

The antipodeans are expected to post mild gains against the US dollar amid market talk of an over pricing-in of a US rate hike, following recent hawkish tilt from the US central bank.

The yen is likely to lose out on its safe-haven demand as more reports dismiss the severity of the new covid variant.

The Dollar Index (DXY)

Key news events today

No major news events.

What can we expect from DXY today?

The lack of Fed chatters and first-tier data releases overnight saw the greenback consolidating recent gains against its major counterparts. A similar scenario is anticipated for the earlier part of the trading day but is likely to the see the US dollar regain composure thereafter as traders start to position for Friday’s CPI amid the overarching hawkish Fed rhetoric.

Central Bank Notes:

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

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

As expected, technical gains on the yellow metal were capped amid the overarching hawkishness from the US central bank. The US CPI data set is expected to come in lower than previous. A materialisation of the expectations would soften the tone for a quicker end to the taper, thus benefitting the US-denominated precious metal.

Next 24 Hours Bias

Mixed

The Australian Dollar (AUD)

Key news events today

RBA Gov Lowe Speaks, 2200 GMT

What can we expect from AUD today?

The Australian central bank governor Lowe did not add to the RBA’s patient stance on monetary policies reiterated on Monday, reaffirming the persistent dovishness among the major counterparts.

Central Bank Notes:

  • Kept Cash Rate at 0.1%. and weekly bond purchases of AUD 4 billion per week until mid-February 2022.
  • Plausible that the first interest rate increase will be not before 2024
  • Will not raise rates to control house prices/ inflation
  • 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 overarching central bank monetary directive is likely to underpin growing kiwi strength against the US dollar. From a trading standpoint, its closest counterpart, the Aussie, would offer more volatility as the RBA has more room for surprises with its dovish outlook.

Central Bank Notes:

  • Need to raise OCR to 2.6% by 2024, pending economic outlook
  • Downgrades to 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

Weak bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

As concerns over Omicron eases and a risk-on sentiment develops, the respective central bank’s monetary policy directive, with BoJ reiterating its high accommodative intentions, would take centre stage on USD/JPY.

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