Daily Analysis Report 12 Jan '2022
Today’s Market Review:
During the Asian session, the European currency is trading flat against the US dollar, stabilizing between 1.1370 and local highs from January 3. Investors are waiting for the release of December consumer price dynamics information from the United States, released today. According to forecasts, annual inflation in the United States is expected to rise to 7.0 percent in December, the highest level in the last 40 years. On the other hand, the monthly indicator may drop from 0.8 percent to 0.4 percent due to a reduction in economic stimulus measures. The latest statistics on consumer price developments could be crucial in determining the American regulator’s monetary policy vector soon. During the day, essential data from Europe will be released. The eurozone, in particular, will release November statistics on industrial production dynamics.
During the morning session, the pound is trading higher versus the US dollar, revisiting new local highs from November 4 and testing 1.3645 for a breakout. The prospect of a future hike in interest rates from the Bank of England, which is currently ahead of the US Fed after adjusting its monetary policy in December, continues to provide significant support for the instrument. Furthermore, investors are optimistic about the British government’s ability to combat the next wave of coronavirus. Due to excellent herd immunity and low fatality of the Omicron strain, the country has avoided the return of large-scale restrictions. Despite high incidence rates, the healthcare system in the UK has not been overburdened. However, the macroeconomic numbers released by the UK yesterday left a lot to be desired. BRC Like-For-Like Retail Sales dropped drastically from 1.8 percent to 0.6 percent, falling short of analysts’ expectations. Investors anticipate the release of a substantial batch of macroeconomic statistics from the UK on the dynamics of GDP and industrial production in November at the end of the week.
In the Asian session, the Australian dollar rose slightly against the US dollar, stabilizing between 0.7220 and local highs from January 6. As the world’s biggest central banks enter a tightening cycle, the instrument remains “bullish” amid widespread market euphoria. Furthermore, despite the Omicron coronavirus strain’s rapid proliferation, markets expect the pandemic’s next peak to pass with fewer economic losses. The situation in the United Kingdom is an example of this, as the government appears to have managed to deal with the surge of morbidity without resorting to large-scale restrictive measures. As a result, the labor market remains susceptible, as many workers are forced to go into self-isolation and quarantine. Certain nations, such as China, follow the zero-tolerance policy for coronavirus. Weak Chinese numbers are putting pressure on the instrument’s positions today. After gaining 0.4 percent in November, the Consumer Price Index dipped 0.3 percent in December. Analysts predicted that growth would decrease to barely 0.2 percent. Inflation fell from 2.3 percent to 1.5 percent on an annual basis, whereas predictions predicted an increase of 1.8 percent.
In Asian trading, the US dollar is gaining ground versus the Japanese yen, attempting to recoup from a significant drop late last week. The instrument is currently testing 115.35 for a breakout, but market activity is still quiet as investors await the release of new US inflation data for December today. According to projections, the yearly consumer price increase could approach 7%, an absolute record in the last 40 years. In turn, the US Federal Reserve is prepared to raise interest rates, with the first increase in the coming year possibly occurring at the March meeting. In a speech to the US Congress the day before, Fed Chair Jerome Powell confirmed the regulator’s preparedness to avoid further entrenchment of inflation, which was previously referred to as a “temporary phenomena.” The impact of today’s Japanese statistics on the instrument’s dynamics is uncertain. The Eco Watchers Survey on Current Situation rose marginally from 56.3 to 56.4 points in December, but the Survey on Economic Outlook declined drastically from 53.4 to 49.4 points in the same period.
XAU/USD is stabilizing on Wednesday after a day of robust gains that saw local highs from January 5 renewed. Since the conclusion of last week, when quotes were at local lows from December 16, the instrument has been establishing a “bullish” trend. At the same time, the world’s biggest central banks, particularly the US Federal Reserve, are expected to raise interest rates soon, putting downward pressure on gold. Markets are almost certain that the American central bank will begin hiking rates at its March meeting; but, they prefer to wait until today’s release of December consumer inflation data. At the same time, as Jerome Powell mentioned in his statement to Congress the day before, investors are expecting a balanced and cautious approach to tightening monetary policy. The US Fed’s Chair emphasized that plans to raise interest rates and end the quantitative easing (QE) program should not hurt the economy or the still-tense labor market.