IC Markets Europe Fundamental Forecast | 17 December 2021

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What happened across the Asia session?

The Bank of Japan maintained its policy setting with interest rate at -0.1% and extended parts of the pandemic relief loan scheme by six months. The central bank reiterates its accommodative stance on monetary policy and highlights uncertaintj over the spread of Omicron.

What does it mean for the Europe and US Sessions?

The interest in the pound should gain, following an unexpected hike of 15bps by the BoE. Going forward, the rate of inflation in the UK will be a key determinant on the direction of the central bank going forward.

The Dollar Index (DXY) Update

Key news events today

No major news events.

What can we expect from DXY today?

A light calendar day in terms of data for the greenback is likely to see consolidation against other major currencies. Wednesday’s FOMC decisions will cushion any deep retracements on the US dollar.

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 29 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 concern on inflation from the BoE, with expectations of up to 6% in April 2022, is likely to re-ignite bullish interest in the precious metal for its widely perceived purpose as an inflation hedge, amid the backdrop of uncertainties still surrounding the new covid variant.

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 European Central Bank kept interest rates on hold and confirmed that the PEPP will end in March 2022. An expansion to the APP is intended to partially compensate the end of the monthly €60 billion bond-buying through PEPP.

Inflation remains as a transitory concern for the ECB.

Central Bank Notes:

  • Next meeting on 3 February 2022

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 SNB maintained its current policy settings with Policy Rate at -0.75% and stated the Swiss as ‘highly valued’ and commitment on currency intervention. Development on the Omicron front would be the main driver for USD/CHF.

Central Bank Notes:

  • Next meeting on 24 March 2022

Next 24 Hours Bias

Mixed

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Inflationary pressures probably prompted the BoE to respond with a rate hike by 15bps to 0.25% during the latest central bank meeting. The MPC voted by a majority of 8-1 to increase the benchmark rate and 9-0 to maintain the amount of quantitative easing at £895 billion.

Central Bank Notes:

  • 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 seeming mild consequences from the new covid variant should see a gradual relaxation of restrictions from global economies, which in turn would lead to bids on the crude and filter through to the loonie.

Central Bank Notes:

  • 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?

Higher energy prices are implied the major central banks raising their inflation expectations for the year and the next.

Meanwhile, Goldman stated that the new covid variant has only mild impact on mobility and oil demand, and sees strong oil demand in 2022 as economics bounce stronger.

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.
  • 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 4 January 2022.

Next 24 Hours Bias

Weak bullish