IC Markets Europe Fundamental Forecast | 17 January 2022

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What happened across the Asia session?

The prime minister of Japan brought forward the booster shot period in order to avoid a serious shortage of hospital beds amid a rise in Omicron infections. The country could enter a quasi-state of emergency soon. On the geo-political front, North Korea fired yet another outside Japan’s EEZ.

What does it mean for the Europe and US Sessions?

The Euro is likely to suffer a further blow towards the downside as ECB President Lagarde dashed hopes of a less dovish central bank rhetoric built up over the past week from inflation-concerned policymakers in the bloc.

The Dollar Index (DXY) Update

Key news events today

Bank holiday, all day

What can we expect from DXY today?

The latest Fed Speak largely reiterated the high inflation concerns, proximity to maximum employment and balance sheet normalisation expected to take place soon after the lift-off in interest rates.

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?

Following the US Fed Chair Powell’s cautious response at last week’s Senate Banking Committee meeting, the precious metal is likely to ease gains further as the chief stated that he is keen to fight inflation but probably with a very measured course of action.

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 Lagarde has once again delivered a dovish stance, reiterating that the central bank expects the drivers of the current inflation to ease in 2022. This follows relatively less dovish calls from other EU policymakers last week.

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 Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

The easing concerns over Omicron slowing global economic recovery is likely to see safe-haven demand for the Swiss franc to recede, benefiting the USD/CHF pair as it bounces off the lows from November and December 2021.

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 UK year-on-year CPI data set due to be released on 19 January, with headline expected to inch 0.1% more than the previous 5.1%, is likely to influence perception on BoE’s pace of rate hike in the central bank’s fight against elevated inflation.

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 firm price of crude and the BoC’s comparatively hawkish central bank policy, relative to the US Fed, is likely to see USD/CAD continue its decline from December 2021.

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?

China has agreed with the US to release crude oil reserves around the start of February. Further on the supply side, 11 oil rigs were added to the count provided by Baker Hughes.

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