IC Markets Asia Fundamental Forecast | 16 June 2023
What happened in the US session?
The Eurozone maintained its main refinancing rate at 4.00%, up from the previous 3.75%. ECB President Lagarde hints at a hike in July as a strategy to control inflation.
U.S. Core Retail Sales slowed to 0.1% compared to the previous 0.4%. However, the Empire State Manufacturing Index greatly outperformed forecasts, rising to 6.6 from an earlier -31.8, indicating a strong recovery in manufacturing. US Retail Sales also saw modest growth of 0.3%, beating the expected -0.2%. Unemployment claims in the U.S. remained steady at 262K, suggesting a stable but not rapidly improving job market.
What does it mean for the Asia Session?
The USD/JPY pair hovers just above the 140.00 level, awaiting the release of the monetary policy decisions by the BoJ. A hawkish development would push the pair lower to 139.30 before 139.00. Alternatively, the Dollar Yen would see a rise to 141.00 before a retest of recent intra-day highs of around 141.50.
The Dollar Index (DXY)
Key news events today
Prelim UoM Consumer Sentiment
What can we expect from DXY today?
If the upcoming release of the Preliminary UoM Consumer Sentiment data surpasses the forecasted figure of 60.1 (previous 59.2), it could positively affect the USD, indicating increased confidence in the economy. Conversely, if the data falls below the forecasted value, it may hurt the USD, signalling reduced confidence in the economy.
Central Bank Notes:
- The federal funds rate target range will be 5 to 5-1/4 per cent.
- The Committee is strongly committed to returning inflation to its 2% target.
- The Committee will adjust monetary policy if risks emerge that could hinder achieving its goals.
- Various factors will be considered, including labour market conditions, inflation pressures, inflation expectations, and international and financial developments.
- Next meeting is on 26 July 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 Eurozone’s refinancing rate at 4.00%, up from 3.75%, and a hinted further hike in July can influence gold prices. Higher rates could initially pressure gold prices due to the raised opportunity cost. However, anticipated rate increases to curb inflation may support gold, a traditional inflation hedge.
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 Australian dollar will likely draw price direction from previously released data, as there are no major news events today. The employment change was reported at 75.9K, exceeding the forecasted value of 18.6K and showing improvement from the previous data of -4.0K. The unemployment rate is 3.6%, lower than the forecasted and prior rate of 3.7%. These figures suggest a stronger AUD due to positive employment growth and a stable job market.
Central Bank Notes:
- The RBA increased the cash rate target by 25 basis points to 4.10%.
- Inflation in Australia has passed its peak but remains high at 7% and needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting on 4 July 2023
Next 24 Hours Bias
Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The upcoming BusinessNZ Manufacturing Index release is anticipated, as the previous value of 49.1 suggested a slight contraction in New Zealand’s manufacturing sector. If the new data indicates further contraction, it could negatively pressure the New Zealand Dollar NZD. Conversely, a rise above 50 could boost the NZD due to increased economic optimism.
Central Bank Notes:
- The Monetary Policy Committee has raised the OCR from 5.25% to 5.50%
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the target range while supporting maximum sustainable employment
- The Committee voted by a majority of five to two to increase the OCR by 25 basis points to 5.50%
- Interest rates must remain restrictive to ensure inflation returns to the target range while supporting maximum sustainable employment
- Next meeting is on 12 July 2023
Next 24 Hours Bias
Mixed
The Japanese Yen (JPY)
Key news events today
Monetary Policy Statement
BOJ Policy Rate
BOJ Press Conference
What can we expect from JPY today?
The Bank of Japan’s upcoming Monetary Policy Statement and press conference are critical events that could influence the JPY. The BOJ is expected to keep its policy rate at -0.10%, continuing its dovish stance to stimulate the economy. Any changes in this stance hinted at in the statement or the press conference, could impact the JPY’s value. If the BOJ stays dovish, we might see the JPY weaken, but unexpected hawkish tones strengthen the JPY.
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 16 June 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 Eurozone Final and Final Core CPI indicate an inflation rate of 6.1% and 5.3%, respectively. The Italian Trade Balance shows a previous surplus of 3.29 billion EUR and a forecasted surplus of 7.54 billion EUR. These data points suggest a high inflation rate and a positive outlook for Italy’s trade performance, which could impact the EUR.
Central Bank Notes:
- The ECB raised the three key interest rates by 25 basis points.
- Economic growth projections have been slightly lowered.
- The Governing Council will ensure interest rates are sufficiently restrictive to achieve the inflation target and keep them at those levels as long as needed.
- Rate decisions will be data-dependent, considering inflation outlook, economic data, underlying inflation dynamics, and monetary policy transmission strength.
- Next meeting on 27 July 2023
Next 24 Hours Bias
Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The Swiss franc is not influenced by any major news event today. The price direction of the CHF is expected to be influenced by previously released data, particularly the PPI m/m figure. The actual PPI m/m value is -0.3%, lower than the forecasted (0.1%) and previous (0.2%) figures. This suggests declining producer prices and lower inflationary pressures in Switzerland, which could support the CHF.
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?
If Consumer Inflation Expectations data exceed 3.9%, the GBP may strengthen due to potential interest rate hikes by the Bank of England. Conversely, if expectations fall below 3.9%, the GBP might depreciate due to possible delays in interest rate increases.
Central Bank Notes:
- The MPC of the BoE voted 7-2 to increase Bank Rate by 0.25 percentage points to 4.5%.
- The updated projections show that CPI inflation is expected to decline slightly above 1% at the two and three-year horizons, below the 2% target.
- CPI increased unexpectedly but is expected to fall sharply over the rest of the year due to lower energy prices.
- Next meeting on 22 June 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?
With a previous reading of -19.07B, an increase in Foreign Securities Purchases could bolster the CAD. However, a drop from the last 46.0% to the forecasted 1.4% in Wholesale Sales could imply a slowing economy, potentially weakening the CAD.
Central Bank Notes:
- The Bank of Canada increased its target for the overnight rate to 4.75%.
- Canada’s economy was more substantial than expected in the first quarter of 2023, with GDP growth of 3.1%.
- The Bank expects CPI inflation to ease to around 3% in the summer, but concerns have increased about inflation staying above the 2% target.
- Next meeting on 12 July 2023
Next 24 Hours Bias
Mixed
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The depreciation of the US dollar and a surge in China’s refinery operations could continue to bolster global oil prices. As oil is primarily traded in dollars, a weaker greenback makes it cheaper for other countries, potentially increasing demand and prices. Simultaneously, China’s expanded refinery runs indicate rising crude oil demand, likely due to heightened manufacturing or economic growth.
Next 24 Hours Bias
Weak bullish
