IC Markets Europe Fundamental Forecast | 7 December 2021

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What happened across the Asia session?

As widely expected, the RBA kept Cash Rate at 0.1%. and weekly bond purchases of AUD 4 billion per week until mid-February 2022. The central bank reiterated its commitment to maintain its highly supportive monetary conditions.

What does it mean for the Europe and US Sessions?

The technical bounce in AUD/USD is likely to wane, following short-covering amid easing Omicron concerns and lack of surprises from the RBA. A sustained upward move is more likely to take place in the NZD/USD pair, where RBNZ’s rate hike cycle is in progress.

The Dollar Index (DXY) Update

Key news events today

No major news events.

What can we expect from DXY today?

The light calendar day for the US dollar is likely to shift focus back to the recent hawkishness demonstrated by the members of the central bank. A continuation in consolidation for the world’s reserve currency would be the most likely scenario.

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

Mixed

Gold (XAU) Update

Key news events today

No major news events.

What can we expect from Gold today?

A quiet day in terms of data for the US dollar is likely to translate to a similar consolidation tone for the precious metal. The overarching hawkishness from the US Fed is likely to cap intra-day gains motivated by the technical crowd.

Next 24 Hours Bias

Mixed

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

Despite the mild severity of Omicron, the ECB is reported to be assessing the price inflation influences in the euro zone from the new covid variant. This development may alter the central bank’s view of inflationary pressures easing by the end of 2022.

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

Weak bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Easing concerns over the new covid variant is likely to see an improvement in the risk-on sentiment, consequently reducing the demand for the Swissy that has been outperforming among fellow safe-haven assets.

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 Bearish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

BoE’s Broadbent expects inflation to rise further, possibly above 5%, in the coming months. With regards to the policymaker’s decision on interest rates, the impact of Omicron on spending, in UK and globally, would be the main consideration.

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 favourable development for oil price and abating concerns with regards to Omicron is likely to see the recent stellar Canadian economic data beginning to price into the loonie.

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

Strong bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Saudi Arabia raise its Official Selling Price for January to Asia and the US, its second increase month-on-month, despite OPEC+ committing to raise its collective output quota by 400,000 barrels per day for the same month.

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 bullish