IC Markets Europe Fundamental Forecast | 28 March 2022

What happened across the Asia session?

The Bank of Japan offered to buy an unlimited amount of 5- and 10-year JGBs at a fixed rate of 23 bps.

What does it mean for Europe and US Sessions?

Oil and consequently, the loonie, is likely to feel the weight from the positive developments in the Iran nuclear deal and the Moscow-Kyiv negotiation. 

The Dollar Index (DXY) Update

Key news events today

No major news events. 

What can we expect from DXY today?

Fed’s Williams would back a 50bps hike in the fed funds rate depending on data and carries the view that recent economic data has been coming in much stronger than expected. However, the policymaker’s view on inflation differs from fellow member Daly, who says prices increases are far from target for price stability.

Central Bank Notes:

• Seven hikes for 2022, with the FFR seen reaching 2.75%-3.0% in 2023
• Inflation forecasts for 2022 were raised to 4.1% (previous 2.7%) 
• GDP estimates were lowered to 2.8% from 4.0% 
• Next meeting on 4 May 2022

Next 24 Hours Bias

Weak Bullish

Gold (XAU) Update

What can we expect from Gold today?

The outcome of the negotiation between Russia and Ukraine, with the next round slated from 28 – 30 March, would directly impact the safe-haven refuge. Negative developments from the table would benefit the precious metal more than a positive, amid the global rise in supply- and war-led inflation.

Next 24 Hours Bias

Mixed-to-Weak Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

ECB President Lagarde stated that growth in the EU could be as low as 2.4% in 2022 due to the war in Eastern Europe, although inflation is expected to decrease, again, and settle at levels around the 2% target in 2024 under all scenarios.

Central Bank Notes:

• Sped up normalization pace of APP with an aim to end the programme in Q3
• An end to APP should not be seen as accelerating but rather as normalizing 
• Next meeting on 14 April 2022

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

SNB Chairman Jordan acknowledges that inflation in the country is high but still relatively low when compared with international peers. The chief added that the nominal value of CHF is different from its real value while the CHF remains relatively highly valued and the central bank will intervene to prevent the Swiss franc from becoming too strong.

Central Bank Notes:

• Kept all policies unchanged as expected, 
• More concerned with the Real Effective Exchange Rate as opposed to the nominal. 
• Remains very dovish and in no way expected to change anytime soon. 
• Next meeting on 29 April 2022

Next 24 Hours Bias

Mixed

The Pound (GBP)

Key news events today

BOE Gov Bailey Speaks, 1100 GMT 

What can we expect from GBP today?

The upcoming speech by the Bank of England Governor may clarify the previously deemed hawkish stance from the central bank before the Russia-Ukraine confrontation.

Central Bank Notes:

• 25bps, as expected, was not a unanimous decision with BoE’s Cunliffe voting to leave rates unchanged. 
• Inflation forecasts were upgraded to 8% in Q2 (previous 7.25%),
• Next meeting on 5 May 2022

Next 24 Hours Bias

Mixed

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

The consolidation seen in the price of crude is expected to spill over to the major oil-exporter. The heightened possibility of an Iranian nuclear deal is also expected to weigh on the black gold.

Central Bank Notes:

• Optimistic about the growth outlook and reiterated that it expects further interest rate rises will be needed. 
• Potential for 50bps rate hikes, noting that oil prices around $110 per barrel could add another percentage point to inflation. 
• Next meeting on 13 April 2022

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Saudi Aramco’s facilities at distribution stations in Jazan and Jeddah were attacked by Yemen rebels, although the consequences to oil exports are deemed to be relatively insignificant. 

The energy minister from the UAE lamented that financial institutions are not willing to finance many global projects in oil/gas.

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 2022.
• Next meeting on 31 March 2022. 

Next 24 Hours Bias

Weak Bearish