IC Markets Europe Fundamental Forecast | 19 May 2022

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What happened across the Asia session?

The Australian Employment change saw a much lower figure than expected at 4.0k (expected 30.0k, previous 17.9k), while Unemployment Rate is in line with expectations at 3.9% (previous 4.0%).

What does it mean for Europe and US Sessions?

The Aussie would be a good tag to play the sustained strength in the USD based on the monetary policy disparity and the growing risk-off over the risk-on sentiment.

The Dollar Index (DXY) Update

Key news events today

No major news events. 

What can we expect from DXY today?

The latest Fed-speak reaffirms Fed chair Powell’s speech that broad support is present to have 50bps hikes on the table at the next two meetings to deal with elevated inflation until it subsides.

Central Bank Notes:

  • Confirmed that the committee expects further 50bps hikes to be appropriate; 75bps hikes off the table
  • Balance sheet reduction push up to $60b (treasuries) and $35b (MBS) over a three-month timeframe
  • Next meeting on 15 June 2022

Next 24 Hours Bias

Strong Bullish

Gold (XAU) Update

Key news events today

No major news events. 

What can we expect from Gold today?

Despite toppish inflation rates seen in the US and the UK, the latest CPI increases in Canada, an oil-rich country that has avoided most energy-led inflation, reaffirms the central banks’ approach to acting aggressively to increase rate, an action detrimental to the non-interest-bearing yellow metal.

Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

The latest ECB-speak raises hope for at least a 25bps interest rate hike after the APP ends in July.

Central Bank Notes:

  • Plans to phase out the APP into Q3 remained intact by reducing purchases from 40bln to 30bln in May and then down to 20bln in June. 
  • Highlighted risks for the economic outlook are tilted to the downside and have recently intensified with geopolitical and virus-related challenges. 
  • Next meeting on 9 June 2022

 

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?

SNB chief Jordan reiterated that negative interest rates and currency interventions are necessary for the central bank to achieve its mandate.

Central Bank Notes:

  • Kept all policies unchanged as expected, 
  • More concerned with the Real Effective Exchange Rate than the nominal. 
  • Remains very dovish and in no way expected to change anytime soon. 
  • Next meeting on 16 June 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?

UK Chancellor Sunak pledged to provide tax cuts for targeted UK businesses in the upcoming budget.

Central Bank Notes:

  • A third of the six members who voted for a hike viewed that the latest increase marked the end of the current hiking cycle
  • Peak inflation revised to more than 10%, which added to the stagflation fears; possible GDP contraction in 2023. 
  • Quantitative tightening plans to be updated at the August meeting
  • Next meeting on 16 June 2022

Next 24 Hours Bias

Mixed-to-Weak Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

The latest-higher-than-expected Canadian CPI data set reaffirms the BoC’s aggressive rate hike path. However, the short-term bearish pressure on the price of crude is expected to balance the mix.

Central Bank Notes:

  • Announced a start to passive quantitative tightening from the end of April by ending its reinvestment of maturing bonds. 
  • Increased their neutral rate estimate to 2.5% from 2.25%. 
  • Next meeting on 1 June 2022

Next 24 Hours Bias

Mixed

Oil

Key news events today

No major news events.

What can we expect from Oil today?

The price of crude is likely to be pressured by the risk-off sentiment and a rising greenback amid a lack of first-tier data releases and specific news flow.

Next 24 Hours Bias

Mixed-to-Weak Bearish