IC Markets Asia Fundamental Forecast | 9 October 2023
What happened in the US session?
Non-farm payrolls (NFPs) posted a huge surprise to the upside with 336k jobs created in September versus the forecast of 171k while the unemployment rate remained unchanged at 3.8%. In addition, the figures for August were revised up from 187k to 227k. The sectors with the largest job gains were leisure and hospitality, government and health care. The blowout NFP number initially caused the dollar index (DXY) to spike as high as 106.97 last Friday but the move was short-lived as it tumbled under 106.00 by the end of the US session.
What does it mean for the Asia Session?
Markets were jolted by the Hamas attack on southern Israel over the weekend as geo-political risks rose to the forefront. The DXY gapped higher to open above the 106-level this morning while crude oil prices surged more than 3% with WTI oil racing towards the $86 per barrel mark. As Asian markets digest the Middle East turmoil and its potential impact on markets, especially the energy sector, crude prices are expected to remain elevated while demand for safe-haven assets such as gold and the US dollar could also see renewed inflows.
The Dollar Index (DXY)
Key news events today
FOMC Member Barr Speaks (12:00 pm GMT)
FOMC Member Jefferson Speaks (4:50 pm GMT)
What can we expect from DXY today?
Federal Reserve Governors Michael Barr and Philip Jefferson are due to speak at their respective conferences where they could continue with the hawkish rhetoric for the US dollar as seen over the last couple of weeks. Furthermore, the Hamas attack on southern Israel over the weekend has brought geo-political risks to the forefront and could increase the demand for safe-haven assets such as 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
FOMC Member Barr Speaks (12:00 pm GMT)
FOMC Member Jefferson Speaks (4:50 pm GMT)
What can we expect from Gold today?
Markets were jolted by the Hamas attack on southern Israel over the weekend as geo-political risks rose to the forefront. Demand for safe-haven assets such as gold could also see renewed inflows with spot prices rising strongly towards the $1,860/oz region. Federal Reserve Governors Michael Barr and Philip Jefferson are due to speak at their respective conferences where they could continue with the hawkish rhetoric for the US dollar as seen over the last couple of weeks, which could add some downward pressure for this precious metal during the US session.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
Westpac Consumer Sentiment (11:30 pm GMT)
What can we expect from AUD today?
The Westpac-Melbourne Institute Consumer Sentiment index in Australia fell by 1.5% MoM to 79.7 in September 2023, remaining close to its worst level since the 2020 pandemic lockdowns as falling household savings and concerns over budget and taxation weigh on the Australian consumers. The Aussie gapped lower this morning to open at 0.6355 but then proceeded to rise strongly towards 0.63810 in a bid to close the gap.
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.10% for the fourth consecutive meeting.
- Inflation in Australia has passed its peak but is still too high and will remain so for some time yet.
- Some further tightening of monetary policy may be necessary.
- Next meeting is on 7 November 2023.
Next 24 Hours Bias
Medium Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi gapped lower this morning to open at 0.5965 but then proceeded to rise strongly towards 0.5990 as it attempted to close the gap.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee agreed that the OCR needs to stay at a restrictive level to ensure that annual consumer price inflation returns to the 1 to 3% target range and to support maximum sustainable employment.
- While supply constraints in the economy continue to ease, inflation remains too high.
- Spending needs to remain subdued to better match the economy’s ability to supply goods and services, so that consumer price inflation returns to its target range.
- Next meeting is on 29 November 2023.
Next 24 Hours Bias
Medium Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Last Friday’s blowout NFPs caused USD/JPY to jump as high as 149.50 but this currency pair gapped lower this morning to open under 149.00. With the latest Middle East turmoil brewing over the weekend, the Japanese yen could see some strong inflows as demand for safe-haven currencies such as the yen could increase 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 Bearish
The Euro (EUR)
Key news events today
Sentix Investor Confidence (8:30 am GMT)
What can we expect from EUR today?
Investor confidence in the Eurozone pointed to a further downturn and a strengthening of the economic downturn forces in September as the situation in Germany remains particularly precarious. Furthermore, Germany is also weighing heavily on the economy in the euro zone as a whole. October’s forecast indicates that investor confidence is likely to deteriorate further. The Euro gapped lower this morning to open at 1.0550 but rose strongly towards 1.0570 in an attempt to close the gap.
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 Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The latest Middle East turmoil brewing over the weekend could create strong inflows for safe-haven currencies such as the Swiss franc. USD/CHF gapped lower to open at 0.9090 to fall as low as 0.9080 and could remain under pressure 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 Bearish
The Pound (GBP)
Key news events today
BRC Retail Sales Monitor (11:01 pm GMT)
What can we expect from GBP today?
Retail sales in the UK jumped 4.3% YoY in August, accelerating from a 1.8% gain in July and at the fastest pace in four months. The rebound was led by holiday purchases such as health and beauty products which boosted consumer spending. The Pound dropped as low as 1.2200 this morning but then rebounded higher and could continue to climb during the rest of the Asia session.
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 Bullish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
Markets were jolted by the Hamas attack on southern Israel over the weekend as geo-political risks rose to the forefront. Crude oil prices surged more than 3% with WTI oil racing towards the $86 per barrel mark. Rising crude prices are creating strong demand for the Canadian dollar causing USD/CAD to fall under 1.3650. This currency pair is likely to slide lower as the day progresses.
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 Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Markets were jolted by the Hamas attack on southern Israel over the weekend as geo-political risks rose to the forefront. Crude oil prices surged more than 3% with WTI oil racing towards the $86 per barrel mark. As Asian markets digest the Middle East turmoil and its potential impact on markets, especially the energy sector, crude prices are expected to remain elevated.
Next 24 Hours Bias
Medium Bullish
