IC Markets Europe Fundamental Forecast | 19 January 2022

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What happened across the Asia session?

The ANZ Bank predicts that the RBNZ would raise the OCR to 3.0% by April 2023. 

Meanwhile, Australian PM Morrison stated he has yet to receive advice to shorten the isolation period. The country is facing a worsening Omicron situation.

What does it mean for the Europe and US Sessions?

The kiwi is likely to lead its counterparts against the US dollar, following the reminder of RBNZ’s hawkish monetary policy directives established since late last year. 

The inflation figures from the UK and Canada may stir interest in the precious metals in the scenario of higher-than-expected increases.

The Dollar Index (DXY) Update

Key news events today

No major news events.

What can we expect from DXY today?

Despite the lack of first tier currency-specific data releases for the week, the greenback is likely to sustain its gains amid expectations of a reaffirmation of the hawkish lean from the Fed during the upcoming central bank meeting next week.

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 upcoming CPI data set from the UK, with headline year-on-year price increase expected to come in 0.1% higher than the previous 5.1%, may provide the impetus to buy into the precious metal if the data exceeds expectations.

Next 24 Hours Bias

Mixed-to-Weak Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

ECB’s Villeroy is the latest policymaker to touch on the subject on high inflation, seen in France. However, the outlook is in alignment with the comments from President Lagarde, who reiterated that the drivers of the current inflation are 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 US dollar is still likely to gain against the Swiss franc on the back of easing concerns over Omicron and the respective central banks’ monetary policy directives.

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

CPI y/y, 0800 GMT

BOE Gov Bailey Speaks, 1415 GMT

What can we expect from GBP today?

The probable ousting of the UK PM, Boris Johnson, due to alleged offences under the covid laws, is likely to ease bullish enthusiasm towards the hawkish BoE, even if the upcoming inflation data set comes in higher than expected. 

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 Bearish

The Canadian Dollar (CAD)

Key news events today

CPI m/m, 1330 GMT

What can we expect from CAD today?

Despite the recent rise in oil prices, the loonie did not make the expected advances against the greenback, signalling a probable shift in focus to the respective central banks’ monetary policy stances. The US Fed is deemed more aggressive than the BoC.

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

Mixed-to-Weak Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

OPEC retain its upbeat outlook for oil demand in 2022 despite an imminent hike in interest rates and the ongoing plague from the coronavirus variant, Omicron. Geo-political developments Middle East raise supply concerns from further terrorist attacks in the near future. 

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 2022, expects world oil demand to rise by 4.15m bpd
  • Next meeting on 2 February 2022. 

Next 24 Hours Bias

Weak Bullish