IC Markets Europe Fundamental Forecast | 13 October 2021

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What happened across the Asia session?

The greenback stayed relatively flat against the antipodeans while losing grounds to EUR and GBP ahead of the inflation data and FOMC meeting minutes due for release later today.

What does it mean for the Europe and US Sessions?

Moves in the Asian session are likely to be sustained until the release of the FOMC meeting minutes, unless the US inflation numbers post significant upside surprise (expected 0.2%, prev. 0.1%).

The Dollar Index (DXY) Update

Key news events today

CPI m/m, 1230 GMT

Core CPI m/m, 1230 GMT

FOMC Meeting Minutes, 1800 GMT

What can we expect from DXY today?

Despite the recent mixed US jobs report, the latest comments from Fed speakers reiterate that a taper in the asset purchase program remains appropriate in the near term. Inflation remains transitory in the eyes of the central bank.

Central Bank Notes:

  • Tapering likely to start in November; end in mid-2022
  • Sees one hike in 2022, three hikes in 2023

Next 24 Hours Bias

Weak Bullish

Gold (XAU) Update

Key news events today

No major news events.

What can we expect from Gold today?

With the US Fed and ECB deeming inflation as largely transitory, the bearish pressure on gold would remain. A significant rise in the upcoming US CPI data release would jolt the transitory view, however.

Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

With a lack of currency-specific news flow/ upcoming data releases, the overall dovishness from the ECB would see its single currency pressured by the hawkish tilt in the central banks from the US, UK, Canada and New Zealand.

Central Bank Notes:

  • PEPP monthly purchase target set between EUR60-70 billion, likely to end March 2022
  • Net purchases under APP will continue at EUR20 billion per month for as long as necessary
  • Mixed GDP growth projections over the next three years

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

As expected, the break above the 0.93 handle on USD/CHF materialised, possibly on the back of the overarching central banks’ theme. A sustained break is likely to come from favourable US CPI and FOMC meeting minutes releases.

Central Bank Notes:

  • Reiterated pledge to intervene in FX market to counter upward pressure on CHF, which was classified as ‘highly valued’.
  • Keeping a close eye on mortgage lending and residential property prices.

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 hawkish tilt of the Bank of England remains intact, following concerns raise by Governor Bailey over inflation running above the central bank’s target of 2%. The possibility of more factory closures in the country due to persistently high energy prices would tame the hawkishness somewhat.

Central Bank Notes:

  • Bank of England Governor Bailey stated that inflation will be higher than forecast, urge Britons to get ready for earlier rate hikes.
  • Members voted 7 – 2 (prev. 8 – 1) to maintain Gilt portfolio at GBP875 billion
  • Q3 GDP revised lower by around 1%
  • Closely monitoring developments in the labour market

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 Loonie lies in a comfortable position to retain its strength from the elevated demand for oil, its relatively strong economic outlook, hawkish central bank policies.

Central Bank Notes:

  • Underestimated rate of growth in inflation and GDP.
  • Expects economy to strengthen in H2 2021
  • Rate hike likely in H2 2022
  • Matured bond purchases of around CAD 1 billion a week on average
  • Will continue to right-size monetary policy to support recovery and achieve inflation objective

Next 24 Hours Bias

Weak Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

The International Energy Agency warned of higher oil prices and instability of global energy markets ahead, if demand remains elevated.

The White House reiterated the call for OPEC to alleviate the bullish pressure on oil prices but the latter has yet to budge.

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 next year.

Next 24 Hours Bias

Weak bullish