IC Markets Europe Fundamental Forecast | 8 December 2021

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What happened across the Asia session?

BoJ will decide on the extension of its pandemic relief programmes in a couple of months. The central bank’s deputy governor added that the country’s outlook remains highly uncertain due to the emergence of Omicron.

What does it mean for the Europe and US Sessions?

Risk currencies are likely to lose favour going into the sessions, following sustained government alertness to the new covid variant, Omicron, despite early reports of its mild severity.

The yen is like to lag the Swiss franc in safe-haven demand, following a possible extension of supportive covid-related measures in Japan.

The Dollar Index (DXY) Update

Key news events today

JOLTS Job Openings, 2300 GMT

What can we expect from DXY today?

A continuation of consolidation for the greenback would be the most likely scenario, following another light calendar day. Focus would be maintained on the recent hawkishness reiterated by the members of the US Fed.

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?

Advances in the precious metal, anticipated to be technically driven amid a lack of tier-one data from the US, is likely to be capped amid the overarching hawkishness from the US central bank. An upcoming US CPI data set release due on Friday may rock the boat.

Next 24 Hours Bias

Mixed

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

ECB’s Kazmir and Muller stated their views that inflation risks remain skewed to the upside, showing signs that the policymakers may move away from a ‘transitory’ view of the current elevated prices increases. A faster pace in removing the PEPP is on the cards.

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?

The sustained seven-day upper price range on the USD/CHF highlights that market fears over Omicron, despite reassurance from early reports on its mild severity, lingers. Any negative headline news on the new covid variant is likely to see the Swiss franc dominate its safe-haven counterparts again.

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?

A light calendar day in terms of both, currency-specific news flow and data, is likely to see movement on the pound dependent on upcoming jobs data and central bank release for the greenback and loonie, respectively, during the last session of the trading day.

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

Mixed

The Canadian Dollar (CAD)

Key news events today

BOC Rate Statement, 2300 GMT

Overnight Rate, 2300 GMT

What can we expect from CAD today?

The loonie is likely to see a continuation of the pricing-in of its strong economic data, easing concerns over Omicron and the currently rally in crude ahead of the BoC meeting later today.

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?

According to the latest short-term energy outlook from the EIA, world oil demand growth is cut by 10,000 bpd for 2021 to 5.10 million bpd while the same measure is raised by 200,000 to 3.55 million bpd for 2022.

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