IC Markets Europe Fundamental Forecast | 14 April 2023
What happened in the Asia session?
The impact of the two data releases on the NZD has been mixed, with the weaker BusinessNZ Manufacturing Index muting the positive growth in Visitor Arrivals m/m. Consequently, the Kiwi consolidated within a 30-pip range during the session.
What does it mean for the Europe & US Sessions?
The US Dollar Index, DXY, stands a chance for a technical rebound near the 100.00 level, provided the upcoming Retail Sales data beat expectations. In parallel, the Euro could drop to test 110.00 while the Cable retraces to 125.00 if the optimistic scenario for the USD pans out.
The Dollar Index (DXY)
Key news events today
Core Retail Sales m/m
Retail Sales m/m
Prelim UoM Consumer Sentiment
What can we expect from DXY today?
The upcoming US Retail Sales data set release is expected to hurt the currency. Both the Core Retail Sales m/m and Retail Sales m/m are forecasted to decrease by 0.4%, which indicates a decrease in consumer spending. Additionally, the Prelim UoM Consumer Sentiment is predicted to remain unchanged at 62.0, which suggests that consumers are not feeling any more optimistic about the economy.
Central Bank Notes:
- The US banking system is sound and resilient, but recent developments may result in tighter credit conditions for households and businesses.
- The Federal Reserve has raised the target range for the federal funds rate to 4-3/4 to 5 per cent, committed to returning inflation to its 2 per cent objective.
- In determining the extent of future increases in the target range, the Committee will consider various factors, including the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and economic and financial developments.
- Next meeting is on 3 May 2023
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The decline in US PPI could positively impact gold prices as lower-than-expected inflation rates can lead to a weaker US dollar, increasing the demand for gold as a safe-haven asset. Lower PPI figures can signal economic uncertainty and a potential downturn, prompting the Fed to adopt a less hawkish monetary policy, which can also benefit gold prices.
Next 24 Hours Bias
Mixed
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
Today, there is no significant news event for the AUD. Traders will likely focus on the previously released economic data, particularly the better-than-expected Employment Change and Unemployment Rate figures for March.
Central Bank Notes:
- Kept the cash rate unchanged at 3.60%
- Full impact of previous interest rate hikes is yet to be felt.
- Inflation in Australia has peaked, and the central forecast is to decline this year, at around 3% in mid-2025.
- Further tightening of monetary policy may be necessary to achieve the 2 – 3% inflation target
- Next meeting on 2 May 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 NZD is expected to be impacted by two upcoming data releases – the BusinessNZ Manufacturing Index (previous 52.0) and Visitor Arrivals m/m (-26.3). A worse-than-expected data puts downward pressure on the currency, and better-than-expected data provide upward momentum.
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?
Today’s lack of significant news events for the Japanese yen means the previously released data will likely influence the currency’s price direction, specifically the M2 Money Stock y/y data, which has remained relatively stable at 2.6%.
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 German WPI and French Final CPI releases are expected to have a minor impact on the EUR. The forecasted figures are within a relatively small range and indicate stability in the German and French economies. German Buba President Nagel is due to speak about inflation at the Peterson Institute for International Economics in Washington DC
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?
The forecasted data indicates that the PPI m/m is expected to increase by 0.1% (previous -0.2%), leading to a stronger CHF as the SNB would likely maintain its hawkish monetary policy.
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
Weak Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
Silvana Tenreyro, a member of the BoE’s MPC, is scheduled to participate in a panel discussion regarding inflation at the IMF Spring Meetings in Washington, DC. Her comments on the Bank of England’s approach to battling inflation could impact the GBP.
Central Bank Notes:
- The BoE’s MPC increased the Bank Rate by 25bps to 4.25%, with a majority of 7-2 in favour of the hike
- The UK banking system is judged to be robust and resilient.
- CPI inflation increased unexpectedly but is expected to fall sharply over the rest of the year due to lower energy prices.
- The MPC will continue to monitor inflationary pressures and adjust Bank Rate as necessary.
- Next meeting on 11 May 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 upcoming Canadian Manufacturing Sales m/m data release will hurt the CAD. The previous data showed positive growth of 4.1%, while the forecasted data predicts a decrease of -2.5%. This indicates a significant decline in the manufacturing sector.
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 Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The weak USD is still expected to boost demand for oil and lead to an increase in prices. As the greenback weakens, oil becomes relatively cheaper for buyers using other currencies, which can increase demand and put upward pressure on prices. This trend will likely continue in the short term, with the latest soft US PPI data set in alignment.
Next 24 Hours Bias
Weak Bullish
