IC Markets Europe Fundamental Forecast | 17 November 2023
What happened in the Asia session?
With no economic news in the morning, the DXY stayed neutral, ranging between the high of 104.6, and the low of 104.2. As we are approaching the end of the week, with no news to push prices, we can expect slower movement in the market.
Gold prices rose overnight, and is approaching a level of resistance. We could expect Gold to hover below this level of resistance, under the 1984.5 zone. If Gold manages to break past this resistance level, then we could expect Gold to rise up further.
What does it mean for the Europe & US sessions?
The final print for Eurozone CPI will be released today and should show the headline CPI easing to 2.9% YoY for the month of October. With both the headline and core readings showing further signs of easing, inflationary pressures are slowly but surely dissipating in this region. Softer CPI will allow the ECB to maintain a neutral outlook with regards to its monetary policy and is likely to weigh on the Euro.
Meanwhile, retail sales in the UK have been mixed over the past four months as sales declined 0.9% MoM in September. The forecast for October points to a relatively strong gain of 0.5% – this would mark the largest monthly gain since April. Stronger sales could provide a boost for the Pound.
The Dollar Index (DXY)
Key news events today
Building Permits (1:30 pm GMT)
What can we expect from DXY today?
Building permits have printed higher than their respective estimates over the past two months. October’s forecast of 1.45M permits is lower than the previous two readings and a softer number could signal weakness in the residential construction sector and potentially add downward pressure on the greenback during the US session.
Central Bank Notes:
- The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the second meeting in a row.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2.0% over the longer run.
- The Committee will continue to assess additional information and its implications for monetary policy.
- In determining the extent of additional policy firming that may be appropriate to return inflation to 2.0% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
- Next meeting runs from 12 to 13 December 2023.
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
Building Permits (1:30 pm GMT)
What can we expect from Gold today?
Building permits have printed higher than their respective estimates over the past two months. October’s forecast of 1.45M permits is lower than the previous two readings and a softer number could signal weakness in the residential construction sector and potentially add downward pressure on the greenback during the US session; thus providing a boost for gold prices.
Next 24 Hours Bias
Weak Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
With no economic news for the Aussie, we could expect slower movement in the market. However, the Aussie is looking bearish as it broke yesterday’s low, and could continue its bearish momentum to fill the imbalance that price caused previously.
Central Bank Notes:
- The RBA increased the cash rate target by 25 basis points to 4.35%, the first increase in five meetings.
- Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago.
- Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.
- Next meeting is on 5 December 2023.
Next 24 Hours Bias
Medium Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
With no economic news for the Kiwi, we could expect slower movement in the market. Based on market structure itself, the Kiwi created a higher high, and could possibly create a higher low. Hence, we could see the Kiwi continue being bearish, before reversing to the upside.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee agreed that the OCR needs to stay at a restrictive level to ensure that annual consumer price inflation returns to the 1 to 3% target range and to support maximum sustainable employment.
- While supply constraints in the economy continue to ease, inflation remains too high.
- Spending needs to remain subdued to better match the economy’s ability to supply goods and services, so that consumer price inflation returns to its target range.
- Next meeting is on 29 November 2023.
Next 24 Hours Bias
Medium Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The currency pairs involving JPY had a major increase in price, and it is slowly starting to decrease in price. We are expecting prices for pairs such as GBP/JPY and EUR/JPY to become bearish for the time being, since the inflation in Japan is expected to increase. We can expect gradual decrease for these currency pairs as Japan’s economy could recover moderately over time.
Central Bank Notes:
- The Bank will continue with QQE with Yield Curve Control, aiming to achieve the price stability target of 2.0%, as long as it is necessary for maintaining that target in a stable manner.
- 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 at around 0% while regarding the upper bound of 1.0% for 10-year JGB yields as a reference in its market operations.
- Medium- to long-term inflation expectations have risen moderately. Even as actual inflation decelerates, inflation expectations are expected to rise moderately toward the end of the projection period, with the output gap turning positive and changes in firms’ wage- and price-setting behaviour and in labour-management wage negotiations. This will likely lead to a sustained rise in prices accompanied by wage increases.
- Japan’s economy is likely to continue recovering moderately for the time being, supported by factors such as the materialization of pent-up demand, although it is expected to be under downward pressure stemming from a slowdown in the pace of recovery in overseas economies.
- Next meeting is on 19 December 2023.
Next 24 Hours Bias
Medium Bearish
The Euro (EUR)
Key news events today
CPI (10:00 am GMT)
What can we expect from EUR today?
The final print for Eurozone CPI will be released today and should show the headline CPI easing to 2.9% YoY for the month of October. With both the headline and core readings showing further signs of easing, inflationary pressures are slowly but surely dissipating in this region. Softer CPI will allow the ECB to maintain a neutral outlook with regards to its monetary policy and is likely to weigh on the Euro.
Central Bank Notes:
- The ECB kept the three key interest rates unchanged.
- Inflation is still expected to stay too high for too long, and domestic price pressures remain strong.
- The Governing Council’s past interest rate increases continue to be transmitted forcefully into financing conditions.
- The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
- Next meeting is on 14 December 2023.
Next 24 Hours Bias
Weak Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
With no economic news for the currency pair, we could expect slower movement in the market. In the Asia session, price reached a low of 0.8855, and has started to reverse to the upside. We could see price becoming bullish to fill the imbalance that price created, however, it would have to overcome the most recent high at 0.8899.
Central Bank Notes:
- The SNB unexpectedly kept the policy rate unchanged at 1.75% in September.
- Inflation forecasts remain unchanged at 2.2% for both 2023 and 2024 while it was lowered from 2.1% to 1.9% for 2025.
- 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 projection for GDP growth this year remained unchanged at 1.0%.
- Next meeting is on 14 December 2023.
Next 24 Hours Bias
Medium Bullish
The Pound (GBP)
Key news events today
Retail Sales (7:00 am GMT)
What can we expect from GBP today?
Retail sales in the UK have been mixed over the past four months as sales declined 0.9% MoM in September. The forecast for October points to a relatively strong gain of 0.5% – this would mark the largest monthly gain since April. Stronger sales could provide a boost for the Pound during the Europe session.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6-to-3 to maintain its Official Bank Rate at 5.25%.
- Three members preferred to increase the Bank Rate by 0.25 percentage points to 5.5%.
- CPI inflation remains well above the 2% target, but is expected to continue to fall sharply, to 4¾% in 2023 Q4, 4½% in 2024 Q1 and 3¾% in 2024 Q2.
- This decline is expected to be accounted for by lower energy, core goods and food price inflation and, beyond January, by some fall in services inflation.
- The mean projection for CPI inflation is 2.2% and 1.9% at the two and three-year horizons respectively.
- Next meeting is on 14 December 2023.
Next 24 Hours Bias
Weak Bullish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
With no economic news for the currency pair, we could expect slower movement in the market. We can expect the USD/CAD currency pair to gain bullish momentum as it broke past a level of resistance at 1.3735. Since Canada’s economy has weakened, the USD/CAD currency pair could possibly increase in price. There was little to no movement in the Asia session, however, we could see volatility in the US session.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%, for the second meeting in a row.
- Canada’s economy has weakened with growth forecast for 2023 lowered to 1.2% from 1.8%
- Economic growth is expected to continue to be weak, growing 0.9% and 2.5% in 2024 and 2025 respectively.
- The Bank expects CPI inflation to average around 3.5% through the middle of 2024 before gradually easing to 2.0% in 2025.
- However, the near-term path for CPI is higher because of energy prices and ongoing persistence in core inflation.
- Next meeting is on 6 December 2023.
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Oil prices dropped around 5% on Thursday to their lowest in four months, as investors worried about global oil demand following weak data from the U.S. and Asia.
Brent crude oil fell to $77.42 a barrel, and WTI crude oil fell to $72.90 a barrel. Both Brent and WTI earlier traded at their lowest since July 7, at $76.60 and $72.16, respectively.
After reaching a 4-month low, we can expect the price of oil to retrace slightly, gaining slight bullish momentum before continuing its bearish momentum.
Next 24 Hours Bias
Weak Bullish
