IC Markets Europe Fundamental Forecast | 18 January 2022

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What happened across the Asia session?

The BoJ kept its monetary setting with rates unchanged at -0.1%. and stated that it expects rates to remain low. On a more upbeat note, the central bank raised FY22 CPI and Real GDP forecast.

What does it mean for the Europe and US Sessions?

The US dollar spike during the Asian session, in the face of rising yields, and looks set to offer trading opportunities in the Aussie and Euro to the downside. Both the RBA and ECB remain consistently dovish amid a global rise in inflation.

The Dollar Index (DXY) Update

Key news events today

No major news events.

What can we expect from DXY today?

The lack of key currency-specific data releases for the day and news flows ahead of the US central bank meeting on 26 January are likely to see the greenback take the backseat, with news/data from other major counterparts to lead the way.

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

Mixed-to-Weak bullish

Gold (XAU) Update

Key news events today

No major news events. 

What can we expect from Gold today?

While no major news event/data releases are expected to impact the precious metal, the upcoming CPI data set from Germany, the UK, Canada, the Euro zone and Japan this week may provide renewed arguments for a flock to the inflation hedge amid global rising prices.

Next 24 Hours Bias

Mixed

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

The latest caution from ECB’s Schnabel to not raise rates too quickly is not able to overcome the comments from the central bank’s President Lagarde, where the latter delivered a dovish stance reiterating that the drivers of the current inflation is likely to ease in 2022. 

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 Swiss franc is still expected to weaken further from easing concerns over Omicron slowing global economic recovery, with the latest affirmation from a possible scrap of Plan B measures in the UK which could take place this week or the next.

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?

A resignation from UK PM Boris Johnson, due to the breaking of covid laws during the country’s lockdown period, could shake the British pound. In the meantime, however, the sterling is likely to maintain its recent gains ahead of year-on-year CPI data set due to be released on 19 January.

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 same factors, i.e., firm price of crude and the central bank’s comparatively hawkish central bank policy, are likely to keep the Loonie steady against its major counterparts.

Separately, the fourth quarter Business Outlook Survey from the BoC saw continued improvement to 5.99 (previous 4.56).

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?

The latest terrorist attack in UAE raised geo-political risk, though oil production seems to be unscathed.

Easing Omicron concerns in Europe and its anticipated mild impact on the recovery of the economies are likely to continue to support the firm oil prices.

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 Bullish