IC Markets Europe Fundamental Forecast | 15 May 2023
What happened in the Asia session?
The BusinessNZ Services Index for New Zealand was 49.8, lower than the forecasted 53.8. This contraction suggests a slow economic activity, potentially impacting the NZD negatively.
Japan’s PPI was 5.8%, higher than the forecasted 5.6%, indicating increased inflationary pressures in Japan.
What does it mean for the Europe & US Sessions?
The USD consolidated last Friday’s gains during the Asia session and will likely continue to give up mild gains against the other major currencies during the European session. A favourable US Empire State Manufacturing Index data release in the US session could motivate the dollar bulls to regroup and reach 103.00.
The Dollar Index (DXY)
Key news events today
Empire State Manufacturing Index
What can we expect from DXY today?
The upcoming Empire State Manufacturing Index data release is forecasted to show a significant improvement with a positive value of 10.8, indicating a strong manufacturing sector in New York. If the actual reading aligns with or exceeds the forecast, it could positively impact the USD, boosting investor confidence and attracting foreign investments.
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
Weak Bullish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The decrease in Preliminary UoM Consumer Sentiment data for the United States suggests a reduction in consumer confidence and may have implications for various sectors, including the gold market. When consumer sentiment is low, investors may be more inclined to seek safe-haven assets like gold, which could increase demand and price.
Next 24 Hours Bias
Weak bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The previous 9.4% increase in consumer sentiment could bolster the AUD if this upward trend continues. Meanwhile, the RBA’s monetary policy meeting minutes could also sway the AUD, depending on whether their outlook indicates changes to interest rates or quantitative easing policies. Positive figures and a hawkish stance might strengthen the AUD, while negative data or a dovish outlook could weaken it.
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
Weak bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The upcoming BusinessNZ Services Index release, previously at 54.4, is expected to impact the New Zealand Dollar (NZD). If the index rises, indicating service sector growth, the NZD could strengthen. A decrease could indicate an economic slowdown, potentially weakening the 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
Mixed
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The JPY may face pressure from two critical economic data releases. The expected PPI is forecasted at 5.6% y/y, lower than the previous 7.2%. Additionally, the Preliminary Machine Tool Orders y/y stands at -15.2%. The decrease in PPI and adverse tool orders, indicating a possible economic slowdown, could weaken the JPY in the short term.
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 bearish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The upcoming data releases for the EUR include German WPI m/m with a forecast of a 0.3% increase (previous data was 0.2% increase), EU Economic Forecasts, Industrial Production m/m with earlier data of 1.5% (forecast-2.5%), Eurogroup Meetings, and a speech by German Buba President Nagel. Positive data or events, such as higher WPI, favourable economic forecasts, and productive Eurogroup Meetings, could strengthen the EUR. Conversely, negative data might weaken the EUR, like a further decline in industrial production or any uncertainties or disagreements in the Eurogroup Meetings. The speech by the German Buba President could also influence market expectations and subsequently impact the currency.
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?
The upcoming release of the Swiss Franc PPI m/m data, with a forecasted change of 0.1%, is expected to have a modest impact on the currency. The previous data recorded a 0.2% increase in PPI m/m. A lower-than-expected PPI m/m figure may indicate reduced inflationary pressures, potentially leading to a neutral or slightly negative signal for the CHF.
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?
The upcoming release of the UK’s Conference Board Leading Index, which previously contracted by 0.8%, is expected to influence the GBP. If the contraction continues or deepens, the GBP could be negatively impacted due to economic slowdown concerns. However, an improvement could bolster the GBP as it indicates economic recovery.
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 previous data showed Housing Starts at 214,000 units, and Wholesale Sales declined by 1.7% m/m. The forecasted figures indicate an increase in Housing Starts to 221,000 units and a smaller decline of 0.3% m/m for Wholesale Sales. If the actual data meets or exceeds the forecasted values, it could strengthen the CAD, indicating a robust housing market and healthier business activity. Conversely, if the actual data falls short of the forecasted figures, it may weaken the CAD.
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
Weak bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Growing recession risks and the US debt ceiling impasse are set to impact energy markets and oil prices significantly. The oil industry may experience decreased demand due to reduced economic activity, leading to lower oil prices.
Next 24 Hours Bias
Weak bearish
