IC Markets Asia Fundamental Forecast | 3 October 2023
What happened in the US session?
As expected, the ISM Manufacturing PMI contracted for the11th consecutive month. However, not only did the reading of 49.0 beat expectations, it was also the highest figure in nearly a year, signalling some improvement for this sector while the prices sub-index continues to show inflationary pressures dissipating.
Meanwhile, FOMC Chairman Jerome Powell did not make any direct remarks about monetary policy actions during yesterday’s roundtable discussion but Governor Michelle Bowman reiterated her hawkish stance by stating that multiple rate hikes may be required to get inflation under control, even after the latest round of CPI and PCE data pointed to the slowest price increases since 2020. Governor Bowman’s statements sent the dollar index (DXY) racing towards 107.00 overnight.
What does it mean for the Asia Session?
The Reserve Bank of Australia (RBA) are set to announce their latest monetary policy statement where they are widely expected to hold their official cash rate at 4.10% for the fourth meeting in a row. With both headline and core CPI readings showing an ongoing slowdown in Australia, the RBA has room to ‘pause’ once again as the effect of higher interest rates reverberates through the economy. The Aussie traded around 0.6360 this morning but could slide lower if the RBA’s statement offers a dovish outlook together with a hold on the cash rate.
The Dollar Index (DXY)
Key news events today
JOLTS Job Openings (2:00 pm GMT)
What can we expect from DXY today?
The JOLTS job openings data has been trending lower over the past seven months with July’s reading coming in much lower than the estimate. Falling job openings signal a potential slowdown in the US labour market and another softer print for the month of August is likely to function as a bearish catalyst for the US dollar.
Central Bank Notes:
- The Federal Funds Rate target range remained unchanged at 5.25% to 5.50%.
- The Committee is strongly committed to returning inflation to its 2.0% target.
- The Committee will adjust monetary policy if risks emerge that could hinder achieving its goals.
- Various factors will be considered, including labour market conditions, inflation pressures, inflation expectations, and international and financial developments.
- Next meeting runs from 31 October to 1 November 2023.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
JOLTS Job Openings (2:00 pm GMT)
What can we expect from Gold today?
The JOLTS job openings data has been trending lower over the past seven months with July’s reading coming in much lower than the estimate. Falling job openings signal a potential slowdown in the US labour market and another softer print for the month of August is likely to function as a bearish catalyst for the US dollar and could finally provide some lift for gold in the near-term during the US session.
Next 24 Hours Bias
Medium Bearish
The Australian Dollar (AUD)
Key news events today
RBA Rate Statement (3:30 am GMT)
What can we expect from AUD today?
The Reserve Bank of Australia (RBA) are set to announce their latest monetary policy statement where they are widely expected to hold their official cash rate at 4.10% for the fourth meeting in a row. With both headline and core CPI readings showing an ongoing slowdown in Australia, the RBA has room to ‘pause’ once again as the effect of higher interest rates reverberates through the economy. The Aussie traded around 0.6360 this morning but could slide lower if the RBA’s statement offers a dovish outlook together with a hold on the cash rate.
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.10% for the third consecutive meeting.
- Inflation in Australia has passed its peak and is trending lower but needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting is on 3 October 2023.
Next 24 Hours Bias
Medium Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi is likely to take cue from its Pacific neighbour following the release of the cash rate statement by the Reserve Bank of Australia. With strong demand for the US dollar, the Kiwi dropped under 0.5950 overnight and continued to slide lower as Asian markets came online.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the 1% to 3% target range while supporting maximum sustainable employment.
- Headline inflation and inflation expectations have declined but the core reading remains too high.
- Next meeting is on 4 October 2023.
Next 24 Hours Bias
Medium Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
With demand for the US dollar remaining strong on the opening day of the new trading week, USD/JPY is attempting to break above the key threshold of 150.00 and it looks like it could finally occur today.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2.0%.
- The Bank of Japan decided on the following measures:
- Yield curve control: Negative interest rate of -0.1% on policy-rate balances and purchase of Japanese government bonds to keep 10-year JGB yields around +0.5% and -0.5% from the target level.
- Inflation expectations have shown some upward movements against medium- to long-term inflation expectations and wage growth rise, accompanied by changes in factors such as firms’ wage- and price-setting behaviour.
- Japan’s economy is likely to continue recovering moderately for the time being.
- Next meeting is on 31 October 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?
With demand for the US dollar remaining strong on the opening day of the new trading week, the Euro tumbled under 1.050 overnight and is expected to remain under pressure today.
Central Bank Notes:
- The ECB raised the three key interest rates by 25 basis points.
- Economic growth projections have been slightly lowered.
- The Governing Council will ensure interest rates are sufficiently restrictive to achieve the inflation target and keep them at those levels as long as needed.
- Rate decisions will be data-dependent, considering inflation outlook, economic data, underlying inflation dynamics, and monetary policy transmission strength.
- Next meeting is on 26 October 2023.
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
CPI (6:30 am GMT)
What can we expect from CHF today?
Consumer inflation in Switzerland has eased considerably since its peak of 3.4% YoY in February of this year, with the CPI for the month of August printing at 1.6% YoY. On a monthly basis, CPI edged slightly higher by 0.2% in August while September’s estimate points to an unchanged figure. With demand for the US dollar remaining strong, USD/CHF climbed as high as 0.9195 overnight and could break above 0.9200 today.
Central Bank Notes:
- The SNB unexpectedly kept the policy rate unchanged at 1.75% in September.
- Inflation forecasts remain unchanged at 2.2% for both 2023 and 2024 while it was lowered from 2.1% to 1.9% for 2025.
- SNB predicts modest growth for the rest of the year due to subdued foreign demand, loss of purchasing power from inflation, and stricter financial conditions.
- The projection for GDP growth this year remained unchanged at 1.0%.
- Next meeting is on 14 December 2023.
Next 24 Hours Bias
Weak Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
With demand for the US dollar remaining strong on the opening day of the new trading week, the Pound dived under 1.2100 overnight and is expected to remain under pressure today.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5-to-4 to maintain its Official Bank Rate at 5.25%.
- Four members preferred to increase the Bank Rate by 0.25 percentage points, to 5.5%.
- CPI inflation is expected to fall significantly further in the near term, reflecting lower annual energy inflation, despite the renewed upward pressure from oil prices, and further declines in food and core goods price inflation. Services price inflation, however, is projected to remain elevated in the near term.
- The mean projection for CPI inflation remained unchanged and is expected to decline to 2.0% and 1.9% at the two and three-year horizons, respectively.
- Next meeting is on 2 November 2023.
Next 24 Hours Bias
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
With demand for the US dollar remaining strong on the opening day of the new trading week, USD/CAD broke above 1.3650 with ease overnight and could continue its ascent towards 1.3700 today.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%.
- Canada’s economy was more substantial than expected in the second quarter of 2023, with GDP growth of 3.3%.
- The Bank expects CPI inflation to ease to around 3.0% in the summer, but concerns have increased about inflation staying above the 2.0% target.
- Next meeting is on 25 October 2023.
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
API Weekly Crude Oil Stock (8:30 pm GMT)
What can we expect from Oil today?
China’s declining oil demand is impacting crude oil markets while previously overlooked new oil supplies from Iran, Iraq, Libya, Nigeria, and Venezuela have also contributed to the current pullback in crude oil prices. WTI oil tumbled below the $88 per barrel mark and continues to slide lower. The API weekly stockpiles are due to be released later today and a larger-than-expected draw could act as a bullish catalyst for this commodity in the near-term and provide some cushioning to oil prices.
Next 24 Hours Bias
Medium Bearish
