IC Markets Europe Fundamental Forecast | 14 January 2022

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What happened across the Asia session?

Policymakers from the Bank of Japan are reportedly discussing the possibility of a rate hike before the central bank reaches the 2% inflation target.

What does it mean for the Europe and US Sessions?

The Euro is expected to remain on an upward trajectory following the break above a six-week range. The technical move is underpinned by a subtle shift in ECB’s stance on inflation being “transitory”.

The Dollar Index (DXY) Update

Key news events today

Core Retail Sales m/m, 1330 GMT

Retail Sales m/m, 1330 GMT

What can we expect from DXY today?

Fed’s Harker stated in favour of balance sheet normalisation after a period of sustained interest rate increases while fellow member Evans holds a similar view of up to four interest rate hikes in 2022. Other voices from the Fed speak reiterated concerns over inflation while their view on maximum employment status differs.

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 Fed speak casts the spotlight back to inflation as being the main determinant for raising rates, up to four times, in 2022. The precious metal is expected to have further gains capped and reverse before the next Fed meeting on 26 January.

Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

ECB’s de Guindos stated that inflation will not be “transitory” compared with statements from previous months. 

In the latest ECB economic bulletin, the central bank expects the ongoing global recovery to face near-term pressure from the Omicron variant.

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?

The recent drop seen on the USD/CHF pair is largely due to weakness in the former. The 0.91 handle that was tested multiple times over the past few months is likely to attract bids prior to a recovery in the greenback.

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 pound is expected to maintain bids amid hawkish BoE expectations, despite worsening Omicron developments in the country and speculation that UK PM Boris Johnson could step down due to infringements of covid restrictions. 

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 fluctuation in oil is still expected to dictate the short-term movement in the Lonnie amid a lack of first-tier currency-specific data releases and news flow from the major oil exporter.

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 Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Demand concerns from China, the world’s second largest oil consumer and top oil importer, amid the country’s zero-covid strategy, is likely to spark a corrective move in the price of crude.

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 Bearish