IC Markets Asia Fundamental Forecast | 21 March 2023
What happened in the US session?
In conjunction with the BoC, BoE, BoJ, ECB, and SNB, the Fed announced a joint effort to augment liquidity via the existing USD liquidity swap line arrangements.
What does it mean for the Asian Session?
The recovery rallies in risk assets due to the central banks’ coordinated efforts may fizzle if more headlines concerning the banking crisis develop. In this scenario, gold will probably reach its 2020/2022 high of approximately $2,070.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The number of existing home sales is expected to rise to 4.19M from the previous figure of 4.00M. If this forecast is met, it could signal an improvement in the US housing market, leading to increased demand for the USD.
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 Bullish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The joint effort by the central banks to augment liquidity through USD liquidity swap line arrangements may temporarily suppress the demand for gold as it has been seen as a safe-haven asset during times of economic uncertainty and market volatility.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
Monetary Policy Meeting Minutes
What can we expect from AUD today?
Volatility is anticipated as the RBA’s Monetary Policy Meeting Minutes release approaches. The previous meeting saw the Cash rate raised by 25 basis points to 3.60%, with the central committed to fighting inflation. A hawkish tone in the minutes may boost AUD, while a dovish tone could pressure it downward.
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?
The most recent release for the New Zealand Trade Balance is -714M, better than the forecasted figure of -1450M. The better-than-expected figure may lead to a short-term appreciation of the NZD as it suggests that the country is importing less than anticipated.
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 Bullish
The Japanese Yen (JPY)
Key news events today
Bank Holiday
What can we expect from JPY today?
Today is a bank holiday in Japan, so there are no scheduled data releases for the Japanese 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 27 April 2023
Next 24 Hours Bias
Mixed
The Euro (EUR)
Key news events today
German ZEW Economic Sentiment
ECB President Lagarde Speaks
What can we expect from EUR today?
The German ZEW Economic Sentiment data is expected to decline from 28.1 to 14.9. This could negatively impact the EUR currency, leading to a decrease in foreign investment and a weaker euro.
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
Weak Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
Swiss Trade Balance data is expected to decrease from 5.08B to 3.45B. This could have a mixed impact on the currency, as a decrease in trade balance could signal a weakening economy, but it could also indicate increased imports and consumer spending.
Central Bank Notes:
- Current policy rate is at 1.00%
- Next meeting on 23 March 2023
Next 24 Hours Bias
Mixed
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
UK’s Public Sector Net Borrowing is forecasted at 10.1B (prev. -6.2B), indicating potential fiscal instability and inflation concerns that could negatively impact the GBP.
If the yield on the upcoming 30-year bond auction is lower and the ratio higher, it could increase the currency’s value. A higher yield and lower ratio could decrease its value.
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.
CPI m/m
Median CPI y/y
Trimmed CPI y/y
What can we expect from CAD today?
Canada’s CPI is forecasted to remain at 0.5% m/m. Median CPI y/y is expected to drop from 5.0% to 4.8% and Trimmed CPI y/y from 5.1% to 4.9%. If data matches the forecast, it could have a bearish impact on CAD.
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
Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The WTI’s recovery rally based on the central banks’ joint effort to stem the banking crisis can be expected to stall at a technical level of around $68.
Next 24 Hours Bias
Weak Bearish
