IC Markets Europe Fundamental Forecast | 25 November 2021

IC Markets No Comments

What happened across the Asia session?

The UAE, an OPEC+ member, stated that it has no prior stance ahead of the cartel’s meeting on 2 December, and is fully committed to adhere to the agreement which states an increase in production by 400,000 barrels per day every month until April next year.

What does it mean for the Europe and US Sessions?

The highlight of the day is on BoE governor Bailey’s speech that could see more of a hawkish lean, following prior positive jobs report, inflation and PMI data.

The Dollar Index (DXY) Update

Key news events today

Bank Holiday

What can we expect from DXY today?

The latest hawkish FOMC minutes overshadowed the relatively dovish data releases which saw the latest quarter-on-quarter preliminary GDP at 2.1% (expected 2.2%, prev. 2.0%) and month-on-month Core PCE Price Index at 0.4% (expected 0.4%, prev. 0.4%).

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

Mixed

Gold (XAU) Update

Key news events today

No major news events.

What can we expect from Gold today?

The latest US month-on-month Core PCE Price Index came in alignment with expectations, reaffirming the central bank’s message that elevated inflation seen currently is likely to be transitory.

The duration of this inflation period remains elusive, however, thus adding to the appeal of the precious metal as the commodity price reaches a technical support area.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

ECB’s Schnabel remains in alignment with the central bank’s cautiousness towards hawkishness while fellow policymaker Makhlouf pointed to a deeper reduction in asset purchases as a first step to curb persistent inflation.

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

The bearish reaction seen on USD/CHF, following a breach of the highs from September around the 0.9350 region, hints of the Swiss National Bank’s intervention in the currency market 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

Weak Bullish

The Pound (GBP)

Key news events today

BOE Gov Bailey Speaks, 1700 GMT

What can we expect from GBP today?

Bank of England’s Tenreyro expects mild monetary policy tightening in the near term, to respond to current elevated inflation before price risks eases in the medium term. The upcoming speech by the central bank’s governor should provide greater clarity on December’s meeting.

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?

The loonie could be dealt another blow, apart from sluggish oil price, from an increase in duty imposed by the US on Canadian softwood lumber for most producers to 17.9%.

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

Weak Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

On the demand side, additional lockdowns in Europe from Italy and France due to the worsening covid situation may drag on OPEC+’s response to the release of SPR by large oil-consuming nations.

On the supply side, EIA Crude Oil Stocks Change rose to 1.02m (expected -0.481m, prev. -2.1m). Meanwhile, the latest data from Baker Hughes saw the oil and gas rig count increase by six, to its highest level since April 2020 at 569.

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 bearish