IC Markets Asia Fundamental Forecast | 4 April 2023
What happened in the US session?
The ISM Manufacturing PMI, which measures the health of the US manufacturing sector, posted a reading of 46.3, lower than the forecasted value of 47.5 and the previous reading of 47.7. This suggests a contraction in the sector and could negatively impact the value of the USD.
What does it mean for the Asia Session?
Demand worries may creep in following the surprise move by OPEC+, as oil prices remain in consolidation mode after the significant price gap higher on Monday.
On the central bank front, the intra-day uptrend in the Aussie may see a steep retracement if the RBA presents a dovish outlook for the monetary plans ahead.
The Dollar Index (DXY)
Key news events today
JOLTS Job Openings
What can we expect from DXY today?
US job openings can be expected to decrease from 10.82m to 10.49m. If the actual data falls short of the forecast, it may negatively impact the USD, suggesting that the labour market is weakening.
Central Bank Notes:
- The US banking system is sound and resilient, but recent developments may result in tighter credit conditions for households and businesses.
- The Federal Reserve has raised the target range for the federal funds rate to 4-3/4 to 5 per cent, committed to returning inflation to its 2 per cent objective.
- In determining the extent of future increases in the target range, the Committee will consider various factors, including the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and economic and financial developments.
- Next meeting is on 3 May 2023
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The latest Switzerland CPI m/m is lower than forecasted and previous values, reinforcing a global trend of easing inflation. This may have a bearish impact on gold prices since the yellow metal is deemed a hedge against rising inflation.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
Cash Rate
RBA Rate Statement
What can we expect from AUD today?
The Australian Cash Rate is forecasted to increase from 3.60% to 3.85%, but it could be a dovish hike since Australian CPI y/y fell for two reported periods. Traders will look for this confirmation in the RBA rate statement. If confirmed, AUD is likely to move swiftly.
Central Bank Notes:
- Cash rate raised by 25 basis points to 3.60%.
- Board prioritises returning inflation to target, with a likely need for further monetary policy tightening.
- Board to closely monitor the global economy, household spending trends, inflation and labour market outlook when assessing interest rate increases.
- Next meeting on 4 April 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?
No significant news event is impacting the NZD today. Price direction will likely depend on the upcoming RBNZ Official Cash Rate (5.00% vs 4.75%) and Rate Statement. The Rate Statement provides insights into the RBNZ’s future actions, with a more hawkish stance potentially increasing the NZD’s value and a more dovish tone decreasing it.
Central Bank Notes:
- Monetary Policy Committee increased the OCR from 4.25% to 4.75%
- Higher interest rates are needed to reduce inflation and support employment sustainably
- Severe storms in North Island will increase inflation and disrupt production.
- Next meeting is on 5 April 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?
Japan’s upcoming Monetary Base y/y data is forecasted at 2.0% (previous -1.6%), potentially positively impacting JPY. The 10-year bond auction’s predicted yield is 0.50, with a bid-to-cover ratio of 7.6, indicating weaker bond demand, which may negatively affect 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 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 impact on the EUR from second-tier data releases today appears mixed. The German Trade Balance is expected to increase slightly to 16.8B from the previous month’s figure of 16.7B, potentially supporting the EUR as it indicates a healthy trade balance for the Eurozone’s largest economy. However, the Spanish Unemployment Change is forecasted to increase to 8.5K from the previous month’s figure of 2.6K. This may put some pressure on the shared currency.
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 major news event is scheduled for CHF today. Therefore, the price direction of the currency is likely influenced by the latest CPI m/m for Switzerland. The figure was 0.2% (forecast 0.4%, previous 0.7%), lower than expected, potentially putting mild bearish pressure on the Swiss Franc.
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 11 April 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?
The GBP may experience some volatility in the upcoming sessions as two members of the MPC are scheduled to speak. Silvana Tenreyro and Jonathan Haskel will share their views on the economy and monetary policy.
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?
A forecasted increase of 2.2% in Canada’s Building Permits m/m could strengthen CAD currency as it indicates a rise in construction activity—previous data of registered a -4.0% decline in permits issued.
Central Bank Notes:
- Bank of Canada maintains its target for the overnight rate at 4.5%
- Inflation eased in January, but price increases for food and shelter remain high
- BOC is prepared to increase the policy rate further to return inflation to the 2% target.
- Next meeting on 12 April 2023
Next 24 Hours Bias
Weak Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Oil prices should continue to hold the price gains inspired by the surprise cut in production by OPEC+. However, the move by the cartel could also signify that the demand side of the equation may not hold well for the foreseeable horizon.
Next 24 Hours Bias
Mixed
