IC Markets Asia Fundamental Forecast | 23 June 2023
What happened in the US session?
Federal Reserve Chair Jerome Powell stated that the central bank does not anticipate rate cuts shortly and aims to be confident in decreasing inflation. He mentioned they are only a few rate hikes away from reaching the desired level. This stance is expected to strengthen the United States Dollar.
What does it mean for the Asia Session?
The USD/JPY could retrace below 143.00 towards 142.40 if the Japanese CPI data is higher than expected. Otherwise, the pair may retest recent intra-day highs of around 143.20 and advance towards 143.50.
Positive Australian PMI figures could motivate a bounce off a range low towards 0.6800. Conversely, the bears can validate a downward path the 0.6700 if the support at 0.6740 is compromised.
The Dollar Index (DXY)
Key news events today
Flash Manufacturing PMI
Flash Services PMI
What can we expect from DXY today?
If the actual data for the Flash Manufacturing PMI meets or exceeds the forecasted value of 48.6, it could strengthen the currency. Conversely, a lower-than-expected actual value may weaken the currency. Similarly, if the actual data for the Flash Services PMI falls short of the forecasted value of 53.9, it may lead to a USD depreciation.
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?
Fed Chair Powell’s recent statement, indicating no immediate rate cuts and a focus on reducing inflation, is expected to make the USD stronger and gold relatively more expensive for foreign investors, dampening its demand.
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 data releases for the Australian dollar (AUD) include the Flash Manufacturing PMI, forecasted at 48.4, indicating a contraction in the manufacturing sector, and the Flash Services PMI, expected to be 52.1, suggesting expansion in the services sector. The weaker manufacturing PMI may put downward pressure on the AUD, while the positive outlook for services could support the currency.
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
Mixed
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The New Zealand Dollar’s (NZD) price direction is expected to be influenced by recent economic data since there are no major news events today. Trade Balance data decreased to 46M from the predicted 350M and last 236M, indicating a lower difference between the nation’s export and import values, which may apply downward pressure on the NZD. On the other hand, Credit Card Spending increased by 3.3% yearly, lower than the previous year’s 11.0% but still indicating positive consumer spending, which could support the NZD.
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
No major news events.
What can we expect from JPY today?
The forecasted National Core CPI y/y is expected to decrease from 3.4% to 3.1%, indicating a potential slowdown in inflation. Additionally, the Flash Manufacturing PMI is forecasted to decline from 50.6 to 50.2, signalling a possible contraction in the manufacturing sector. These data points could weaken the JPY if the actual releases align with the forecasts, as they may discourage investors and raise concerns about Japan’s economic health.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2%
- 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 around 0%.
- Inflation is expected to decelerate temporarily but is projected to accelerate moderately later, supported by improvements in the output gap and inflation expectations.
- Japan’s economy is expected to recover gradually
- Next meeting is on 27 July 2023
Next 24 Hours Bias
Weak bearish
The Euro (EUR)
Key news events today
French Flash Manufacturing PMI
French Flash Services PMI
German Flash Manufacturing PMI
German Flash Services PMI
What can we expect from EUR today?
The upcoming data releases for the Euro (EUR) include the French Flash Manufacturing PMI (45.4 previous, 45.7 forecasted), French Flash Services PMI (52.2 previous, 52.5 forecasted), German Flash Manufacturing PMI (43.6 previous, 43.2 forecasted), and German Flash Services PMI (56.3 previous, 57.2 forecasted). These releases provide insights into the performance of the manufacturing and services sectors in France and Germany. Higher-than-expected figures could strengthen the currency, while weaker readings may lead to depreciation.
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
Mixed
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The Swiss National Bank (SNB) has increased its policy rate by 0.25 to 1.75%, tightening its monetary policy. As there are no major news events today, the currency’s price direction will likely be influenced by previously released data. The rate hike indicates the SNB’s concerns about inflation and the economy.
Central Bank Notes:
- SNB has tightened its monetary policy further, raising the SNB policy rate by 0.25 percentage points to 1.75%.
- The new forecast predicts average annual inflation at 2.2% for 2023 and 2024 and 2.1% for 2025. Without the rate increase, the estimates would be even higher.
- 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 GDP is projected to grow around 1% this year.
- Next meeting on 21 September 2023.
Next 24 Hours Bias
Weak bullish
The Pound (GBP)
Key news events today
Flash Manufacturing PMI
Flash Services PMI
What can we expect from GBP today?
The forecasted Flash Manufacturing PMI is 46.9 (previous: 47.1), indicating a potential decline in the manufacturing sector. The forecasted Flash Services PMI is 54.8 (prior: 55.2), suggesting a possible service sector slowdown. If the data confirms these forecasts, it could put downward pressure on the GBP, reflecting a weakening economy. However, positive surprises could boost confidence in the GBP.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted to increase Bank Rate by 0.5 percentage points to 5%.
- Two members preferred to maintain Bank Rate at 4.5%.
- CPI inflation is expected to fall significantly due to developments in energy prices.
- 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.
- Next meeting on 3 August 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 Bank of Canada (BOC) minutes revealed that the Governing Council debated whether to keep interest rates unchanged or signal a likely rate hike in July. They also anticipated stronger second-quarter growth than previously forecasted in April. However, the Council expressed increasing concerns about waning disinflationary momentum to bring inflation back to the target rate of 2%. With no major news event today, market participants will closely analyse these factors to determine the CAD’s price direction.
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 Federal Reserve’s indication of additional rate hikes could introduce volatility and uncertainty into the oil market. Furthermore, there has been a surprise drawdown in U.S. crude inventories, although fuel stocks have risen.
Next 24 Hours Bias
Weak bearish
