IC Markets Europe Fundamental Forecast | 13 January 2022

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What happened across the Asia session?

Japan’s Matsuno will deal with any requests on expanding Covid measures in a swift manner, following the country’s coronavirus alert system confirmed to be raised to the second-highest level.

What does it mean for the Europe and US Sessions?

The European session should see a continuation of the technical breakout on the EUR/USD. A higher-than-expected PPI (expected 0.4%, prev. 0.8%) would tame the anticipated gains on the shared currency.

The Dollar Index (DXY) Update

Key news events today

PPI m/m, 1330 GMT

What can we expect from DXY today?

Fed’s Bullard expects four rate hikes in 2022 amid an elevated-prices environment, with the first of the few hikes likely to take place at the March central bank meeting. 

Fellow policymaker Mester chimed in on the high inflation, stating that the underlying sources are not just from supply chain and wage issues, but from a wider spectrum.

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) Update

Key news events today

No major news events. 

What can we expect from Gold today?

The latest inflation data set from the US, seeing its highest in 40 years, and the weakness on the greenback due to over commitment from the bulls, is likely to see the precious metal sustained its gains prior to the upcoming US PPI (expected 0.4%, prev. 0.8%).

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

The breach of the upper limit of a six-week price range on the EUR/USD developed on the latter’s weakness. For the recent gains in the single currency to be sustained, a shift in the persistently dovish tone of the ECB have to come sooner rather than later.

Central Bank Notes:

  • PEPP will discontinue from March 2022.
  • Surprise decline in monthly APP purchases which will see it increased to EUR 40 billion from EUR 20 billion from 2Q22 and then subsequently lowered. 
  • Reiterated that rates are unlikely to rise next year. 
  • Next meeting on 3 February 2022

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Switzerland will extend the current Covid measures to the end of March to alleviate the overwhelmed hospitals in the country but relaxed the quarantine period to just five days.

Central Bank Notes:

  • Kept all polices in line with the previous meeting.
  • More concerned with the Real Effective Exchange Rate as opposed to the nominal.
  • Next meeting on 24 March 2022

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

The Bank of England has reportedly informed banks that proactive steps should be taken to determine the impact from changes in the economic environment. This development hints that the low-interest rate days may soon be over.

Central Bank Notes:

  • Surprised with a 15bps rate hike. 
  • Inflation expectations sees a peak close to 6% in April 2022
  • Next meeting on 3 February 2022

Next 24 Hours Bias

Weak bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

The lack of first-tier currency-specific data releases and news flow from the country is likely to see movement on the loonie tag firmly to the price of oil.

Central Bank Notes:

  • Expects rates at current levels (0.25%) until the middle of 2022. 
  • An earlier hike is possible with solid growth momentum and strong labour markets.
  • Next meeting on 26 January 2022

Next 24 Hours Bias

Weak Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Crude Oil Inventories saw a higher-than-expected draw of -4.6m (expected -2.1m, prev. -2.1m). The worries on the impact on demand from Omicron seems to be abating day by day.

OPEC+ Notes:

  • The cartel agreed on a roadmap in July to gradually raise its collective output quota by 400,000 barrels per day every month from August to April 2022.
  • Maintenance of world oil demand growth forecast for 2021 and 2022, with Q1’ 22 raised by 1.11m barrels per day (bpd) to 99.13m bpd.
  • Next meeting on 2 February 2022. 

Next 24 Hours Bias

Weak Bullish