IC Markets Europe Fundamental Forecast | 24 November 2021

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What happened across the Asia session?

RBNZ raise the Official Cash Rate by 25bps as expected, and sees a further removal of monetary policy stimulus in the near future. The governor added that the re-opening of the country’s economy is not critical to the central bank’s outlook and will take time to consider their options moving forward.

What does it mean for the Europe and US Sessions?

Anticipation for the first-tier US data and the Fed’s meeting minutes is likely to see the greenback consolidate before the late European/ early US session. The market is looking for Fed’s guidance in terms of a faster pace of tapering. A disappointment would see the dollar consolidate deeper into the Thanksgiving holiday.

The Dollar Index (DXY) Update

Key news events today

Prelim GDP q/q, 1330 GMT

Core PCE Price Index m/m, 1500 GMT

FOMC Meeting Minutes, 1700 GMT

What can we expect from DXY today?

The upcoming month-on-month Core PCE Price Index release (expected 4.1%, prev. 3.6%) is likely to reaffirm the latest CPI figure from the US Bureau of Labour Statistics, where it was reported that the annual CPI jumped to 6.2% in October from 5.4% in September, the strongest inflation seen in over three decades.

Central Bank Notes:

  • Taper at the preset pace of US15 billion per month from mid-November
  • Emphasised clear divide between tapering and rate liftoff
  • Next meeting on 15 December 2021

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 bears took the $1,800 psychological level amid covid woes in Europe, where the World Health Organisation warns that COVID death toll could exceed 2.2 million by March.

Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

As expected, the stellar Euro zone flash manufacturing and services PMIs did not lift the EUR/ USD pair from its most recent multi-month lows. The overarching theme on the central policy divergence between the ECB and the Fed remains in play.

Central Bank Notes:

  • Still see inflation declining in 2022 and staying below the 2% target in 2023
  • Stated that conditions for a rate liftoff would not be satisfied in the near future
  • Next meeting on 2 December 2021

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

Between the two safe-haven currencies, USD and CHF, the former has the market’s demand from an anticipated heightened pace in the Fed’s tightening while the latter usually lags the currently dovish ECB in setting monetary policies.

With USD/CHF approaching the highs from September around the 0.9350 region, SNB may act to maintain a low inflation rate environment in the country.

What can we expect from CHF today?

Central Bank Notes:

  • Reiterated pledge to intervene in FX market to counter upward pressure on CHF, which was classified as ‘highly valued’.
  • Keeping a close eye on mortgage lending and residential property prices.
  • Next meeting on 16 December 2021

Next 24 Hours Bias

Mixed

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

BoE’s Bailey is seen trying to avert future market mis-perceptions with a possibility of not giving forward guidance at all on rates.

The better-than-expected UK Flash Manufacturing PMI at 58.2 (expected 57.2, pre. 57.8) takes the central bank one step closer towards raising rates in December.

Central Bank Notes:

  • Perceived hawkishness in prior forward guidance turned to a dovish picture, with certainty for a rate hike in Q4 dropping significantly
  • Mid-term inflation expectations are still well-anchored
  • Next meeting on 16 December

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?

Bank of Canada’s Beaudry presented a rather dovish take on inflation, expecting the elevated prices to ease by next summer.

The mild commitment from the large oil-consuming countries in releasing oil reserves would ease the overhead pressure on oil prices.

Central Bank Notes:

  • Ended QE program and will only purchase to replace maturing bonds
  • Sees conditions for a rate hike to be satisfied around March 2022
  • Lowered projections for growth in 2021 and 2022; raised CPI forecasts for the same period
  • Next meeting on 8 December 2021

Next 24 Hours Bias

Mixed

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Japan’s Prime Minister Kishida confirms the release of oil from state reserves. It was previously reported that the country would release about 4.2m barrels or 1-2 days’ worth of domestic demand. The paltry move, expected from other large oil-consuming nations as well, would hardly put a dent on the elevated fuel 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 next year.
  • Cuts 2021 demand forecast by 160k bpd; keeps 2022 figure at 4.2m bpd
  • Next meeting on 2 December

Next 24 Hours Bias

Weak bullish