IC Markets Europe Fundamental Forecast | 20 March 2023
What happened in the Asian session?
The BOJ Summary of Opinions noted that members stressed the need for maintaining significant stimulus to support the economy and achieve the 2% inflation target. However, some expressed concerns about yield curve distortions, even after raising the 10-year bond yield cap from 0.25% to 0.5% in December.
The latest data of 0.8% for the Rightmove HPI m/m, up from the previous data of 0.0%, could positively impact the GBP, reflecting a healthy housing market and a potential increase in consumer spending.
What does it mean for the Europe & US Sessions?
The fallout of Credit Suisse, even after being taken over by UBS, is likely to hurt risk sentiment. As a result, risk assets will likely take a hit in the upcoming sessions, while safe havens should outperform. Gold can be expected to reach the 2020 & 2022 highs of around $2,070 this week.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The DXY may draw price direction from previously released Prelim UoM Consumer Sentiment showing a lower value. This could lead to a decline in the USD due to weaker economic growth and lower consumer spending.
Central Bank Notes:
- The Committee has raised the federal funds rate target range to 4.5-4.75% and plans to continue increasing it to return inflation to 2%
- The Committee will monitor incoming information and adjust the stance of monetary policy as appropriate to achieve its goals
- A majority vote from the Committee supported the decision to raise the target range
- Next meeting is on 23 March 2023
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
Given the current uncertainty surrounding the central banks’ recent rescue packages for the banking sectors, it is probable that gold will reach its 2020/2022 highs of approximately $2,070.
Next 24 Hours Bias
Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
RBA Assistant Governor Kent is probably among the first central bankers to have said to consider the liquidity-driven financial crisis in formulating interest rate decisions.
Central Bank Notes:
- Cash rate raised by 25 basis points to 3.60%.
- Board prioritises returning inflation to target, with a likely need for further monetary policy tightening.
- Board to closely monitor the global economy, household spending trends, inflation and labour market outlook when assessing interest rate increases.
- Next meeting on 4 April 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?
No major news event for the NZD today. The upcoming Trade Balance figures (-1450M) may influence the price direction south as its imports are likely more significant than its exports, compared to the previous figure of -1954M.
Central Bank Notes:
- Monetary Policy Committee increased the OCR from 4.25% to 4.75%
- Higher interest rates are needed to reduce inflation and support employment sustainably
- Severe storms in North Island will increase inflation and disrupt production.
- Next meeting is on 5 April 2023
Next 24 Hours Bias
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
If the central bank expresses concern about the economy or suggests that it may pursue a looser monetary policy in the Summary of Opinions, the JPY could weaken.
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 EUR are expected to have a moderate impact. German PPI is forecasted to decrease by 1.3% (-1.0% previous), while the trade balance will likely improve to -17.3B (-18.1B previous). The German Buba Monthly Report may not significantly affect the market.
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
Mixed
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
As there are no significant news events for the CHF today, the direction of its price will be dependent on forthcoming data. Switzerland’s forecasted trade balance figure of 3.45B (previous 5.08B) indicates a decrease in Swiss exports or an increase in Swiss imports. If the expected figure is realised, it could be negative for the CHF, suggesting weaker export performance.
Central Bank Notes:
- Current policy rate is at 1.00%
- Next meeting on 23 March 2023
Next 24 Hours Bias
Weak Bearish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The Rightmove House Price Index month-over-month is unlikely to impact the GBP significantly. However, it could still have some minor influence, as any change in the housing market could affect the country’s overall economic outlook.
Central Bank Notes:
- MPC voted to increase Bank Rate by 0.5 percentage points to 4%
- Near-term data developments are crucial in assessing how quickly external and domestic inflationary pressures will abate
- MPC’s updated projections show CPI inflation falling back sharply from its current level
- Next meeting on 23 March 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?
CAD will likely draw direction from previously released data as today sees no significant news event. Foreign Securities Purchases at 4.21B (14.25B forecast, 21.22B previous), IPPI m/m -0.8% (-0.3% forecast, 0.3% previous), and RMPI m/m -0.4% (-0.2% forecast, -0.2% previous).
Central Bank Notes:
- Bank of Canada maintains its target for the overnight rate at 4.5%
- Inflation eased in January, but price increases for food and shelter remain high
- BOC is prepared to increase the policy rate further to return inflation to the 2% target.
- Next meeting on 12 April 2023
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Recession risks, fears of further bank failures, and lower demand expectations from China could continue to pressure oil prices.
Next 24 Hours Bias
Weak Bearish
