IC Markets Europe Fundamental Forecast | 6 December 2021

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What happened across the Asia session?

As expected, consolidation in the greenback followed the mixed US employment numbers. The kiwi lagged against gold and yen among the outperformers anticipated for the session, following RBNZ’s comments that low net migration figures is likely to slow the growth in housing prices.

What does it mean for the Europe and US Sessions?

The global response to Omicron remains seemingly overly cautious, not surprising since some of the major economies were devastated when the Delta variant caught them off guard. Sentiment is likely to remain weak as markets seek more confirmation on the transmissibility and severity of the new covid variant.

The Dollar Index (DXY) Update

Key news events today

No major news events.

What can we expect from DXY today?

Fed’s Bullard reiterated his preference for tapering to end in March and two possible hikes in 2022, with the latter to be included in the discussions during the upcoming central bank meeting on 15 December. A requirement to reduce the balance sheet before raising interest seems unlikely, the policymaker stated.

Central Bank Notes:

  • Taper at the pre-set pace of US15 billion per month from mid-November
  • Emphasised clear divide between tapering and rate lift-off
  • 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 steep drop in US NFP alleviated some bearish pressure off the non-interest-bearing asset as labour concerns, especially if the upcoming release on 7 January also come in weaker, may come to the forefront again for the Fed.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

In the ECB President’s latest tweet, the prevalence of a ‘transitory’ inflation seems to be well ingrained in the Euro zone. The single currency is likely to seek new multi-month lows against the greenback below the 1.1200 handle.

Central Bank Notes:

  • Still see inflation declining in 2022 and staying below the 2% target in 2023
  • Stated that conditions for a rate lift-off would not be satisfied in the near future
  • Next meeting on 16 December 2021

Next 24 Hours Bias

Strong bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

With details of Omicron likely to come in drips and drabs over the course of weeks or even months, bids on the safe-haven currency would likely remain intact and only lessen as time passes.

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

No major news events.

What can we expect from GBP today?

BoE’s Saunders, the first member to switch to a hawkish stance, has raised concerns on the uncertainties over inflation and Omicron, at least for the next few months. The policymaker’s comments may very well lower expectations for a rate hike announcement during the central bank meeting on 16 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 bearish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

Canadian employment data surpassed expectations by a wide margin, with employment change coming at 153.7k (expected 36.5k, prev. 31.2k) and unemployment rate at 6.0% (expected 6.6%, prev. 6.7%). However, the overarching concerns on oil price and Omicron is likely to cloud the strong economic data.

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?

The latest US rig count from oil-field services company Baker Hughes stood flat at 569, with oil rigs at 467 and natural gas rigs as 102. The rig count is viewed as a proxy for activity in the sector.

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 4 January 2022.

Next 24 Hours Bias

Weak bearish