IC Markets Europe Fundamental Forecast | 29 August 2023
What happened in the Asia session?
The dollar index (DXY) fell to a low of 103.83 before finding support around this level to rise towards 104.00. This could be a small retracement-move to the upside before the downturn continues as Europe comes online.
What does it mean for the Europe & US sessions?
Markets will re-open in the UK today and we can expect the regular trading volume to resume during the Europe session. Meanwhile, eyes will be on RBA Designate Governor Michele Bullock who is due to speak at the Sir Leslie Melville Lecture at the Australian National University at 7:40 am GMT where she could provide some insights into her new role and monetary policy stance for Australia.
The Dollar Index (DXY)
Key news events today
CB Consumer Confidence (2:00 pm GMT)
JOLTS Jobs Openings (2:00 pm GMT)
What can we expect from DXY today?
The Conference Board Consumer Confidence survey has improved over the past couple of months but the latest estimate for August points to a potential stall in confidence levels. The JOLTS Jobs Openings have fallen over the last three months, signalling a slowdown in hiring by US corporations. However, July’s forecast points to a higher availability of jobs which could act as a bullish catalyst for the US dollar.
Central Bank Notes:
- The federal funds rate target range will be 5.25% to 5.50%.
- The Committee is strongly committed to returning inflation to its 2.0% 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 runs from 19 to 20 September 2023.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
JOLTS Jobs Openings (2:00 pm GMT)
What can we expect from Gold today?
The JOLTS Jobs Openings have fallen over the last three months, signalling a slowdown in hiring by US corporations. However, July’s forecast points to a higher availability of jobs which could act as a bullish catalyst for the US dollar and thus put further downward pressure on gold prices during the US session.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
RBA Gov-Designate Bullock Speaks (7:40 am GMT)
What can we expect from AUD today?
RBA Designate Governor Michele Bullock is due to speak at the Sir Leslie Melville Lecture at the Australian National University where she could provide some insights into her new role and monetary policy stance for Australia. Some volatility could be expected for the Aussie during the Europe session.
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.10% for the second consecutive meeting.
- Inflation in Australia has passed its peak and is trending lower but needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting on 5 September 2023.
Next 24 Hours Bias
Medium Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi has been trading between a narrow range of 0.5890 and 0.5925 since yesterday’s open. With demand for the US dollar waning thus far, the Kiwi could climb higher today.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the 1% to 3% target range while supporting maximum sustainable employment.
- Headline inflation and inflation expectations have declined but the core reading remains too high.
- Next meeting is on 4 October 2023.
Next 24 Hours Bias
Medium Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Japan’s unemployment rate surprised markets by unexpectedly increasing from 2.5% in June to 2.7% in July. Not only was this latest reading also higher than the forecast of 2.5%, it was also the highest jobless rate in four months. After hitting a high of 146.70 overnight, USD/JPY is pulling back this morning falling towards 146.20.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2.0%.
- 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 +0.5%.
- 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 22 September 2023.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
After hitting a high of 1.0830 overnight, the Euro is racing higher towards 1.0850 this morning. With no notable events in the European calendar, the US JOLTS data could impact the Euro in the latter part of the day.
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 14 September 2023.
Next 24 Hours Bias
Medium Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
USD/CHF jumped as high as 0.8840 overnight before reversing to erase all the initial gains. This currency pair is now sliding towards 0.8800 and could remain under pressure today.
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 1.0% this year.
- Next meeting on 21 September 2023.
Next 24 Hours Bias
Weak Bearish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
Markets will re-open in the UK today and we can expect the regular trading volume to resume during the Europe session. The Pound rose strongly this morning to reach 1.2630 after hitting a low of 1.2590 overnight.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted to increase the Bank Rate by 0.25 percentage points to 5.25%.
- One member preferred to maintain the Bank Rate at 5.0% while another two preferred to increase it by 0.5 percentage points.
- CPI inflation is expected to fall significantly to around 5% by the end of the year, accounted for by lower energy prices but services price inflation is projected to remain elevated in the near term.
- The updated projections show that CPI inflation is expected to decline to 2.0% and 1.9% at the two and three-year horizons respectively.
- Next meeting on 21 September 2023.
Next 24 Hours Bias
Medium Bullish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
With demand for the US dollar falling at the start of the new trading week, USD/CAD hit a low of 1.3570 overnight before reversing to rise above 1.3600. This currency pair could drift lower again as the day progresses.
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 3.0% in the summer, but concerns have increased about inflation staying above the 2.0% target.
- Next meeting on 6 September 2023.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
API Weekly Crude Oil Stock (8:30 pm GMT)
What can we expect from Oil today?
API stockpiles have been drawing down for the past two weeks as US demand for crude oil appears to be picking up. Another strong drawdown could provide a much-needed lift to crude prices as concerns surrounding China’s slowing demand continue to develop. After hitting a high of $80.65 per barrel overnight, WTI oil proceeded to fall quite sharply as it traded around the $79.70 region this morning. Pressures could remain for this commodity today.
Next 24 Hours Bias
Medium Bearish
