IC Markets Europe Fundamental Forecast | 20 November 2023
What happened in the Asia session?
As expected, it was a relatively quiet trading session with the dollar index (DXY) slid lower towards 103.50 while gold prices briefly touched $1,985/oz before pulling back slightly. Crude prices rose strongly after gapping lower at the open but could face resistance around $77.00 per barrel region.
What does it mean for the Europe & US sessions?
Bank of England (BoE) Governor Andrew Bailey is due to speak at the Henry Plumb Memorial Lecture in England where his remarks could have an impact on the direction for the Pound later today. This currency briefly touched 1.2500 last week and could make another attempt to climb past this threshold today.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
It is a pretty empty calendar as the new trading week gets under way and after falling sharply last week, demand for the dollar appears to be waning and is likely to remain under pressure today.
Central Bank Notes:
- The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the second meeting in a row.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2.0% over the longer run.
- The Committee will continue to assess additional information and its implications for monetary policy.
- In determining the extent of additional policy firming that may be appropriate to return inflation to 2.0% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
- Next meeting runs from 12 to 13 December 2023.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
It is a pretty empty calendar as the new trading week gets under way and after falling sharply last week, demand for the dollar appears to be waning and is likely to remain under pressure today. A weaker dollar is likely to boost gold prices once more.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
RBA Gov Bullock Speaks (11:00 pm GMT)
What can we expect from AUD today?
RBA Governor Michele Bullock will be participating in a panel discussion titled “State of the Economy” at the Australian Securities & Investments Commission Annual Forum in Melbourne where she could shed some light on the outlook for monetary policy in Australia in the later part of the day. Prior to her panel discussion, the Aussie could rise beyond 0.6550 today.
Central Bank Notes:
- The RBA increased the cash rate target by 25 basis points to 4.35%, the first increase in five meetings.
- Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago.
- Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.
- Next meeting is on 5 December 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 was one of the strongest performing currencies this morning as it climbed above the key 0.6000-threshold and is likely to remain elevated today.
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?
The Japanese yen saw strong inflows last week causing USD/JPY to fall under the 150-threshold. Downward pressures remain for this currency pair and it is likely to drift lower today.
Central Bank Notes:
- The Bank will continue with QQE with Yield Curve Control, aiming to achieve the price stability target of 2.0%, as long as it is necessary for maintaining that target in a stable manner.
- 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 at around 0% while regarding the upper bound of 1.0% for 10-year JGB yields as a reference in its market operations.
- Medium- to long-term inflation expectations have risen moderately. Even as actual inflation decelerates, inflation expectations are expected to rise moderately toward the end of the projection period, with the output gap turning positive and changes in firms’ wage- and price-setting behaviour and in labour-management wage negotiations. This will likely lead to a sustained rise in prices accompanied by wage increases.
- Japan’s economy is likely to continue recovering moderately for the time being, supported by factors such as the materialization of pent-up demand, although it is expected to be under downward pressure stemming from a slowdown in the pace of recovery in overseas economies.
- Next meeting is on 19 December 2023.
Next 24 Hours Bias
Medium Bearish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The Euro broke above 1.0900 last week and was building on this bullish momentum to climb higher as markets re-opened this morning. With demand for the greenback waning, the Euro is likely to remain elevated today.
Central Bank Notes:
- The ECB kept the three key interest rates unchanged.
- Inflation is still expected to stay too high for too long, and domestic price pressures remain strong.
- The Governing Council’s past interest rate increases continue to be transmitted forcefully into financing conditions.
- The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
- Next meeting is on 14 December 2023.
Next 24 Hours Bias
Medium Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The Swiss franc saw strong inflows last week causing USD/CHF to fall under 0.8900. Downward pressures remain for this currency pair and it is likely to drift lower 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
Medium Bearish
The Pound (GBP)
Key news events today
BoE Gov Bailey Speaks (6:45 pm GMT)
What can we expect from GBP today?
Bank of England (BoE) Governor Andrew Bailey is due to speak at the Henry Plumb Memorial Lecture in England where his remarks could have an impact on the direction for the Pound later today. This currency briefly touched 1.2500 last week and could make another attempt to climb past this threshold today.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6-to-3 to maintain its Official Bank Rate at 5.25%.
- Three members preferred to increase the Bank Rate by 0.25 percentage points to 5.5%.
- CPI inflation remains well above the 2% target, but is expected to continue to fall sharply, to 4¾% in 2023 Q4, 4½% in 2024 Q1 and 3¾% in 2024 Q2.
- This decline is expected to be accounted for by lower energy, core goods and food price inflation and, beyond January, by some fall in services inflation.
- The mean projection for CPI inflation is 2.2% and 1.9% at the two and three-year horizons respectively.
- Next meeting is on 14 December 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?
With demand for the greenback waning last, USD/CAD is likely to remain under pressure today and slide below 1.3700 today.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%, for the second meeting in a row.
- Canada’s economy has weakened with growth forecast for 2023 lowered to 1.2% from 1.8%
- Economic growth is expected to continue to be weak, growing 0.9% and 2.5% in 2024 and 2025 respectively.
- The Bank expects CPI inflation to average around 3.5% through the middle of 2024 before gradually easing to 2.0% in 2025.
- However, the near-term path for CPI is higher because of energy prices and ongoing persistence in core inflation.
- Next meeting is on 6 December 2023.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Crude oil prices have tumbled strongly over the last three weeks with WTI oil shedding more than 15% over this period. WTI oil rebounded strongly last Friday and was trading above $76.00 per barrel this morning. Prices could retrace higher today before the macro-fundamentals come to the forefront once again to add downward pressure for this commodity.
Next 24 Hours Bias
Weak Bullish
