IC Markets Europe Fundamental Forecast | 27 April 2023
What happened in the Asia session?
The ANZ Business Confidence index for New Zealand decreased to -43.8 from the previous reading of -43.4, potentially leading to a decrease in demand for NZD. The Import Prices q/q data for Australia came in at -4.2%, significantly below the forecasted reading of 0.4% and the previous reading of 1.8%. This development may decrease demand for AUD due to the lower cost of imported goods.
What does it mean for the Europe & US Sessions?
Favourable data from the Eurozone could push the EUR/USD pair to revisit the 1.1100 figure as the USD is expected to continue to struggle ahead of lower Advance GDP q/q and increasing Unemployment Claims.
The Dollar Index (DXY)
Key news events today
Advance GDP q/q
Unemployment Claims
What can we expect from DXY today?
The upcoming data releases for the US economy include Advance GDP q/q, with a forecasted figure of 2.0% (previous 2.6%), and Unemployment Claims, with a predicted figure of 247K (previous 245K). A lower GDP figure could negatively impact the value of the USD, while an increase in unemployment claims may suggest a weaker job market and hurt the currency.
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?
The recent Australian CPI data shows an easing trend, possibly lowering the need for investors to hedge against stubbornly high inflation by investing in safe-haven assets like gold, potentially driving down its price.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The upcoming Import Prices q/q data release is expected to show a 0.4% increase from the previous quarter, which is lower than the last increase of 1.8%. This suggests a slower growth rate in import prices, potentially leading to lower inflation rates and reduced demand for the AUD.
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 Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
A continued decrease in New Zealand’s ANZ Business Confidence (previous -43.4) may indicate a reduction in investments and economic activity, which could weaken the overall financial performance of New Zealand, potentially leading to a decrease in NZD.
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 Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Today, no significant news event is affecting the JPY, so the value of the Japanese yen is likely to be influenced by Friday’s Bank of Japan (BOJ) Outlook Report and Monetary Policy Statement. The Japanese central bank is expected to maintain its current monetary policy settings.
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
Mixed
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The upcoming data releases for the Eurozone include the Spanish Unemployment Rate, with a previous rate of 12.9% and a forecasted rate of 13.0%, indicating a slight increase in unemployment in Spain. This could have a potentially negative impact on the EUR.
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 Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
Today, no major news event impacts the Swiss franc, so upcoming data releases and a speech by the SNB Chairman will likely determine its price direction. The two data releases are the Retail Sales y/y with a forecasted figure of 0.4% (previous 0.3%) and the KOF Economic Barometer with a predicted figure of 98.0 (last 98.2). Traders will closely monitor these events to determine CHF’s likely short-term price direction.
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 22 June 2023
Next 24 Hours Bias
Mixed
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
There is no significant news for GBP today; therefore, the previously released data will likely influence the price direction. The CBI Realized Sales data is an essential indicator of the retail sector’s performance in the UK. The latest figure stands at 5, higher than the forecasted figure of 4 and the previous figure of 1. This suggests that the retail sector is performing better than expected, which could positively affect the economy.
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
Weak Bullish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
The BOC Summary of Deliberations revealed that the BOC Governing Council discussed raising interest rates on April 12 or waiting for more evidence. However, the council agreed that market expectations for a rate cut later in 2023 were not the most likely scenario. The BOC’s cautious approach suggests that the CAD price will likely be stable in the short term.
Central Bank Notes:
- Bank of Canada holds its target for the overnight rate at 4.5%
- Labour markets remain tight with persistent price pressures, especially for services
- Economic growth in Q1 looks to be stronger than projected; to be weak through the remainder of this year before strengthening gradually next year
- Prepared to increase the policy rate further to return inflation to the 2% target.
- Next meeting on 7 June 2023
Next 24 Hours Bias
Mixed
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The US Crude Oil Inventories report shows a higher-than-expected decline of 5.1 million barrels (forecast -1.3m, last -4.6m), indicating a tightening supply. This news is likely to have a positive impact on oil prices in the short term. Still, other factors, such as global demand, geopolitical events, and production decisions by oil-producing countries, may temper the effect.
Next 24 Hours Bias
Weak Bullish
