IC Markets Asia Fundamental Forecast | 4 May 2023
What happened in the US session?
The Federal Reserve increased interest rates by 0.25%, bringing the target range to 5.00% – 5.25%, the highest since 2007. While the FOMC hinted at a possible pause, Chairman Powell stated that further rate hikes may be necessary, and cuts are unlikely. Future decisions will depend on incoming data.
What does it mean for the Asia Session?
Oil may see a technical rebound after falling more than 10% in two trading days. The AUD and NZD are expected to sustain recent gains against the USD. A better-than-expected Chinese Caixin Manufacturing PMI (forecast 50.0) would boost the antipodeans.
The Dollar Index (DXY)
Key news events today
Unemployment Claims
What can we expect from DXY today?
The upcoming release of the Unemployment Claims data is expected to show a slight increase from the previous week, with a forecasted figure of 239K compared to the last week’s figure of 230K. The impact on the USD will depend on the deviation from the predicted figure, with a significantly higher figure leading to a sell-off and a substantially lower figure showing a rally.
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 Bearish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
Chairman Powell stated that further rate hikes may be necessary, and cuts are unlikely at the end of the year. This statement implies a bearish undertone for the non-yielding precious metal.
Next 24 Hours Bias
Weak bearish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The upcoming Trade Balance data release for Australia is forecasted to be 13.00B, slightly lower than the previous figure of 13.87B. A decrease in the Trade Balance may indicate weaker export demand or stronger import demand, potentially leading to a weaker AUD.
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 bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
A further decline in building consents (previous -9.0%) would suggest a slowdown in the construction industry, which may hurt the NZD. Conversely, a further increase in commodity prices (last 1.3%) may positively impact the currency by improving export earnings and trade balance.
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?
Due to bank holidays, no significant news is expected from Japan over the next two days.
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 ECB will most likely increase its main refinancing rate from 3.50% to 3.75%; the Monetary Policy Statement and ECB Press Conference are key events that traders will closely monitor as the former may provide further hints of a rate hike, while the latter could give more explanation and support for a continuation of the current rate hike.
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?
No significant news is affecting the CHF market today, and its price direction is likely to be influenced by the upcoming release of the Swiss CPI data. The figure for the current month is forecasted to increase by 0.2% (previous 0.2%).
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 data releases for GBP include Final Services PMI, M4 Money Supply m/m, Mortgage Approvals, and Net Lending to Individuals m/m. Overall, the impact of these data releases on the GBP is likely to be positive if forecasts are met.
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 forecasted values for Trade Balance and Ivey PMI are 0.3B and 59.0, respectively, while the previous values were 0.4B and 58.2. If the actual data releases meet or exceed the forecasted values, it could positively impact the CAD currency, whereas falling short of the predicted values could have a negative impact.
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
Mixed
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Due to concerns about oversupply and weakened demand, black gold may stay weak. Meanwhile, US crude and distillate stockpiles fell while gasoline inventories increased, according to the US Energy Information Administration.
Next 24 Hours Bias
Mixed
