IC Markets Europe Fundamental Forecast | 16 May 2022
What happened across the Asia session?
China’s year-on-year Retail Sales tanked -11.1% (expected -6.2%, previous 3.5%) amid the Covid-19 situation response in the country.
What does it mean for Europe and US Sessions?
The oil demand shock from the world’s largest consumer and importer of oil is reaffirmed by the latest dismal retail sales figure.
The Dollar Index (DXY) Update
Key news events today
No major news events.
What can we expect from DXY today?
The larger-than-expected drop in Consumer Sentiment, a leading indicator of consumer spending which accounts for a majority of overall economic activity, is likely to be adversely reflected in Tuesday’s Retail Sales (expected 1.1%, previous 0.5%).
Central Bank Notes:
- Confirmed that the committee expects further 50bps hikes to be appropriate; 75bps hikes off the table
- Balance sheet reduction push up to $60b (treasuries) and $35b (MBS) over a three-month timeframe
- Next meeting on 15 June 2022
Next 24 Hours Bias
Weak Bullish
Gold (XAU) Update
Key news events today
No major news events.
What can we expect from Gold today?
Rising global interest rates are likely to overshadow the toppish inflation rates and war in eastern Europe, continuing to add bearish pressure on the precious metal.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
ECB’s de Cos stated that the central bank would likely decide to end its stimulus program in July and raise rates sooner after, albeit gradually
Central Bank Notes:
- Plans to phase out the APP into Q3 remained intact by reducing purchases from 40bln to 30bln in May and then down to 20bln in June.
- Highlighted risks for the economic outlook are tilted to the downside and have recently intensified with geopolitical and virus-related challenges.
- Next meeting on 9 June 2022
Next 24 Hours Bias
Mixed-to-Weak Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The developing and prolonged war in eastern Europe is likely to start to take its toll on the European continent, even overshadowing the safe-haven demand for the Swiss franc.
Central Bank Notes:
- Kept all policies unchanged as expected,
- More concerned with the Real Effective Exchange Rate than the nominal.
- Remains very dovish and in no way expected to change anytime soon.
- Next meeting on 16 June 2022
Next 24 Hours Bias
Mixed-to-Weak Bearish
The Pound (GBP)
Key news events today
Monetary Policy Report Hearings
What can we expect from GBP today?
UK PM Johnson has reportedly given the green light for a bill on the North Ireland protocol while his colleagues have turned on the Bank of England, accusing the central bank of ‘failing’ in its duties to alleviate sustained inflation in the country.
Central Bank Notes:
- A third of the six members who voted for a hike viewed that the latest increase marked the end of the current hiking cycle
- Peak inflation revised to more than 10%, which added to the stagflation fears; possible GDP contraction in 2023.
- Quantitative tightening plans to be updated at the August meeting
- Next meeting on 16 June 2022
Next 24 Hours Bias
Mixed-to-Weak Bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
Ahead of Wednesday’s month-on-month Canadian CPI (previous 1.4%), the directional influence on the loonie is dependent on the price of crude amid the backdrop of BoC’s scoff of hikes in excess of 50 bps per turn.
Central Bank Notes:
- Announced a start to passive quantitative tightening from the end of April by ending its reinvestment of maturing bonds.
- Increased their neutral rate estimate to 2.5% from 2.25%.
- Next meeting on 1 June 2022
Next 24 Hours Bias
Mixed-to-Weak Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The North Oil Company, an Iraqi state-run entity, stated that some of its oil wells are taken by Kurdish armed forces. The second-largest producer in the OPEC exported $11.07 billion of oil in March, the highest level in 50 years.
Next 24 Hours Bias
Mixed-to-Weak Bullish