IC Markets Asia Fundamental Forecast | 29 May 2023
What happened in the US session?
The US Core PCE Price Index increased by 0.4% m/m, surpassing the 0.3% forecast and the previous month’s rise. This higher-than-expected inflation could prompt the Federal Reserve to tighten monetary policy further, potentially strengthening the USD.
What does it mean for the Asia Session?
With no data scheduled during the session, the DXY will likely consolidate within a 50-pip range, between 103.80 – 104.30.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
Due to a bank holiday today, the price direction for the USD is likely to be influenced by upcoming data, particularly the CB Consumer Confidence index. This index’s forecasted and previous data are 99.1 and 101.3, respectively. If the actual index exceeds the forecasted figure, it may lead to a stronger USD. Conversely, the USD may weaken if it falls below the predicted figure.
Central Bank Notes:
- The committee raised the target range for the federal funds rate to 5 to 5-1/4 per cent. The U.S. banking system is sound and resilient.
- Tighter credit conditions for households and businesses may weigh on economic activity, hiring, and inflation.
- The committee is committed to returning inflation to its 2% objective
- The committee will adjust monetary policy as appropriate if risks emerge that could impede the attainment of goals
- Next meeting is on 14 June 2023
Next 24 Hours Bias
Mixed
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The higher-than-expected US Core PCE Price Index could prompt the Federal Reserve to tighten monetary policy further, potentially strengthening the USD. As a result, the price of gold, traditionally seen as a hedge against inflation, may face downward pressure due to a stronger US dollar.
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?
No major news event will affect the + Australian dollar today. As a result, the direction of the AUD’s price will depend on upcoming data releases. The forecasted Building Approvals m/m figures suggest a growth rate of 2.3%, while the previous data showed a decline of 0.1%. If the actual data meets or exceeds the forecast, it could indicate a positive outlook for the Australian economy and increase the AUD’s value. Conversely, if the actual data falls short of the estimates, it may raise concerns and weaken the AUD.
Central Bank Notes:
- The Official Cash Rate was increased by 25 basis points to 3.85%.
- Inflation in Australia has passed its peak but remains high at 7%, and it may take some time to return to the target range.
- GDP is forecast to increase by 1.25% this year and around 2% over the year to mid-2025.
- Next meeting on 6 June 2023
Next 24 Hours Bias
Mixed
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The NZD should remain stable today due to no significant news. Attention now shifts to upcoming data releases, particularly the Building Consents m/m, which rose by 7.0%. This report directly impacts NZD, reflecting future construction activity and economic health.
Central Bank Notes:
- The Monetary Policy Committee has raised the OCR from 5.25% to 5.50%
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the target range while supporting maximum sustainable employment
- The Committee voted by a majority of five to two to increase the OCR by 25 basis points to 5.50%
- Interest rates must remain restrictive to ensure inflation returns to the target range while supporting maximum sustainable employment
- Next meeting is on 12 July 2023
Next 24 Hours Bias
Mixed
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The Japanese yen is awaiting the release of the Unemployment Rate data, with a forecasted rate of 2.7%, slightly lower than the previous rate of 2.8%. If the actual rate meets or surpasses the forecast, it could strengthen the yen as it signifies a healthier job market and boosts confidence in the Japanese economy. However, if the actual Unemployment Rate exceeds the forecast and rises above 2.7%, concerns about the job market may weaken the yen.
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 15 June 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?
Due to a bank holiday, today’s currency price direction for the EUR will likely be influenced by the upcoming Spanish Flash CPI y/y data. The forecasted figure is 3.5%, indicating a potential decrease compared to the previous reading of 4.1%. If it aligns with or exceeds the forecasted 3.5%, the market’s reaction to this data could strengthen the EUR, while a lower-than-expected figure may weaken it.
Central Bank Notes:
- The ECB has decided to raise the three key interest rates by 25 basis points as the inflation outlook continues to be too high for too long.
- The ECB will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
- Renewed financial market tensions and Russia’s war against Ukraine remain significant economic downside risks.
- The continued resilience of the labour market could lead to higher growth than anticipated.
- Next meeting on 15 June 2023
Next 24 Hours Bias
Mixed
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
Due to a bank holiday in the country today, the price direction for the CHF is expected to be influenced by upcoming GDP q/q data. The forecasted growth rate is 0.1%, indicating a slight improvement compared to the previous period, with no growth at 0.0%. If the actual growth surpasses the forecasted figure, it could strengthen the CHF, while lower-than-expected or stagnant growth may weaken the currency.
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?
Today’s UK bank holiday means domestic factors won’t directly impact the GBP, but upcoming data releases will. The previous BRC Shop Price Index y/y stands at 8.8%, indicating significant inflation. The GBP’s future direction hinges on market expectations of the BoE’s response to this inflation.
Central Bank Notes:
- The MPC of the BoE voted 7-2 to increase Bank Rate by 0.25 percentage points to 4.5%.
- The updated projections show that CPI inflation is expected to decline slightly above 1% at the two and three-year horizons, below the 2% target.
- CPI increased unexpectedly but is expected to fall sharply over the rest of the year due to lower energy prices.
- Next meeting on 22 June 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’s price direction will rely on upcoming data releases and analysis of forecasted and previous data. The current account deficit for Canada stands at -9.9 billion, showing an improvement compared to the previous data of -10.6 billion. This suggests a reduction in the outflow of funds from the country. Positive data may strengthen the CAD, while negative data could have the opposite effect.
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?
Oil prices could continue to rise following a tentative debt ceiling deal between US President Joe Biden and House Speaker Kevin McCarthy. The deal aims to suspend the $31.4 trillion debt ceiling, potentially averting a default in the world’s largest economy and oil consumer. The agreement has garnered optimism from both the Democratic and Republican parties, and the rise in oil prices reflects renewed investor confidence and reduced uncertainty.
Next 24 Hours Bias
Weak bullish
