IC Markets Europe Fundamental Forecast | 15 October 2021

IC Markets No Comments

What happened across the Asia session?

A mixed bag among the majors, with the Kiwi being the outperformer and Yen underperforming, highlights the session. The respective gain and loss on the former and latter put central bank policies in focus for the light-data session.

What does it mean for the Europe and US Sessions?

A rare hawkish lean from the ECB and the backtracking on hawkishness from the BoE would single out the best cross, EUR/GBP, to trade for the upcoming session.

The fiber and the cable would be appropriate pairs to focus on in anticipation of, and after the release of, the month-on-month US core retail sales data.

The Dollar Index (DXY) Update

Key news events today

Core Retail Sales m/m, 1230 GMT

Retail Sales m/m, 1230 GMT

What can we expect from DXY today?

Hawkish tones from five Fed speakers would provide firm support for a dollar retaliation against the bears. The speakers are largely aligned towards a taper of asset purchases in November, inflation as transitory and premature to discuss a rate hike timeline.

Central Bank Notes:

  • Tapering likely to start in November, December; end in mid-2022
  • Pace of reduction is $10b in treasuries and $5b in MBS
  • 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?

Fears of a relentless rise in inflation, in particular a possible scenario of stagflation, was eased by the latest weaker than expected US PPI. The precious metal should continue to hover just below the psychological resistance at $1,800, until inflation risks rises again.

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 President Largarde notes that the recovery in the Euro zone is increasingly advanced, though her view on inflation remains transitory. Her statements are largely echows by fellow policymakers Rehn and Knot.

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 Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

The risk-on sentiment and the underlying central banks’ directives are likely to support the Swissy in its bullish bounce off the lower boundary of the three-week range around the 0.9230 region. Should the bounce fail, however, a fundamentally unsupported drop would find its way to a technical level around the 0.9150 region.

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?

Bank of England officials downplayed early rate hike expectations amid the ongoing energy crisis and worsening pandemic situation in the country. A rate hike is coming soon but not likely to be as soon the end of this year.

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 Bearish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

The Loonie continues to benefit from the strength in oil. Caution lies ahead approaching the 1.2300 handle, however, as the support area saw tested buying in June. The possible excuses for profit-taking would come from come from the contradiction in oil demand forecasts for 2021 from the insiders, the OPEC, and the outsiders i.e IEA, EIA. The oil cartel projects a drop in demand by 160k bpd.

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

Medium Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

The latest IEA monthly report indicates oil demand in 2021 and 2022 are likely to increase by 170k and 210k barrels per day, respectively.

The bullish forecast was dampened by a relatively big crude build reported by both, the EIA and the US Department of Energy.

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.
  • Cuts 2021 demand forecast by 160k bpd; keeps 2022 figure at 4.2m bpd

Next 24 Hours Bias

Weak bearish