IC Markets Europe Fundamental Forecast | 7 April 2023
What happened in the Asia session?
Japan’s recent economic data are likely to have a positive impact on the Yen, with Average Cash Earnings y/y at 1.1% (forecast 1.2%, previous 0.8%), Household Spending y/y at 1.6% (forecast 4.9%, previous. -0.3%), and Leading Indicators at 97.7% (forecast 97.5%, prior 96.6%).
What does it mean for the Europe & US Sessions?
USD/JPY can be expected to break out of consolidation between 131.00 to 131.90 upon the release of the US labour data. A better-than-expected data set could lead to the pair approaching 133.00, while mediocre numbers would favour a drop towards 130.50.
The Dollar Index (DXY)
Key news events today
Average Hourly Earnings m/m
Non-Farm Employment Change
Unemployment Rate
What can we expect from DXY today?
The US labour data releases could have a mixed impact on the USD, with potential upward pressure from higher wages (Average Hourly Earnings m/m forecasted 0.3%, previous 0.2% ) but downside pressure from a lower number of jobs added (NFP forecasted 228K, last 311K). The Unemployment Rate is predicted to remain unchanged at 3.6%.
Central Bank Notes:
- The US banking system is sound and resilient, but recent developments may result in tighter credit conditions for households and businesses.
- The Federal Reserve has raised the target range for the federal funds rate to 4-3/4 to 5 per cent, committed to returning inflation to its 2 per cent objective.
- In determining the extent of future increases in the target range, the Committee will consider various factors, including the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and economic and financial developments.
- Next meeting is on 3 May 2023
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
Amid the Good Friday holidays in major markets, the precious metal will likely hover just above the $2,000 level before the US labour data releases.
Next 24 Hours Bias
Mixed
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
Due to the bank holiday, AUD’s price direction is likely to draw from the previously released Trade Balance figure that registered 13.87B, higher than the forecasted and previous figures of 11.33B and 11.27B, respectively. This indicates that Australia’s exports exceeded imports during the period, resulting in a positive trade balance.
Central Bank Notes:
- Kept the cash rate unchanged at 3.60%
- Full impact of previous interest rate hikes is yet to be felt.
- Inflation in Australia has peaked, and the central forecast is to decline this year, at around 3% in mid-2025.
- Further tightening of monetary policy may be necessary to achieve the 2 – 3% inflation target
- Next meeting on 2 May 2023
Next 24 Hours Bias
Weak Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
NZD direction will likely be influenced by the previously released ANZ Commodity Prices m/m of 1.3% (last 1.4%) due to the bank holiday.
Central Bank Notes:
- OCR increased by 50bps from 4.75% to 5.25%
- Recent severe weather events in the North Island have led to higher prices, increasing the risk of inflation expectations exceeding the target range.
- New Zealand’s economic growth is expected to slow through 2023 due to the slowing global economy, reduced residential building activity, and the ongoing effects of monetary policy tightening.
- Next meeting is on 25 May 2023
Next 24 Hours Bias
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Optimistic forecasts for the Average Cash Earnings y/y at 1.2% (previous 0.8%) and the Household Spending y/y at 4.9% (last -0.3%) could increase demand for the JPY. The Leading Indicators are expected to increase slightly from 96.6% to 97.5%. This could also suggest a positive outlook for Japan’s economy.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2%
- Japan’s economy is expected to recover gradually
- The bank will not hesitate to take additional easing measures if necessary
- Next meeting is on 27 April 2023
Next 24 Hours Bias
Weak Bullish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The French Trade Balance is expected to improve, with a forecasted value of -11.8B compared to the previous value of -12.9B. This could positively impact the Euro as it indicates an increase in demand for French exports, which can boost economic activity and ultimately strengthen the Euro.
Central Bank Notes:
- ECB raised interest rates by 50 basis points to ensure the 2% inflation target is met
- Inflation is projected to average 5.3% in 2023, with growth at 1%, and underlying price pressures remain strong
- The bank will continue to monitor market tensions closely and will be data-dependent in its policy rate decisions
- Next meeting on 4 May 2023
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?
Due to the bank holiday in the country today, the price direction for CHF is likely to draw from the previously released Unemployment Rate data, which remained stable at 1.9%, indicating the consistent performance of the Swiss economy.
Central Bank Notes:
- Raised policy rate to 1.5% to counter inflationary pressure and ensure price stability. The SNB may need to raise the policy rate further in the future
- The SNB is providing liquidity assistance to Credit Suisse, and the crisis has been halted
- The new inflation forecast assumes a policy rate of 1.5% and puts average annual inflation at 2.6% for 2023 and 2.0% for 2024 and 2025.
- Mortgage and real estate market vulnerabilities persist
- Next meeting on 11 April 2023
Next 24 Hours Bias
Mixed
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
Due to the bank holiday, GBP direction will likely be influenced by previously released housing and construction data that came in mixed.
Central Bank Notes:
- The BoE’s MPC increased the Bank Rate by 25bps to 4.25%, with a majority of 7-2 in favour of the hike
- The UK banking system is judged to be robust and resilient.
- CPI inflation increased unexpectedly but is expected to fall sharply over the rest of the year due to lower energy prices.
- The MPC will continue to monitor inflationary pressures and adjust Bank Rate as necessary.
- Next meeting on 11 May 2023
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 CAD will likely receive a boost from positive labour data, specifically an increase in employment by 34.7K (compared to a forecast of 10.2K and a previous figure of 21.8K) and an unemployment rate of 5.0% (compared to a forecast of 5.1% and a prior rate of 5.0%).
Central Bank Notes:
- Bank of Canada maintains its target for the overnight rate at 4.5%
- Inflation eased in January, but price increases for food and shelter remain high
- BOC is prepared to increase the policy rate further to return inflation to the 2% target.
- Next meeting on 12 April 2023
Next 24 Hours Bias
Weak Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The WTI prices hover around the $80/bbl mark following the surprise production cut announcement from OPEC+ at the beginning of the week. Amid the holidays in major markets, the trend is likely to stay range bound.
Next 24 Hours Bias
Mixed
