IC Markets Asia Fundamental Forecast | 1 May 2023
What happened in the US session?
The Canadian GDP growth rate for the month showed a weaker growth of 0.1%, falling short of the 0.2% forecast and significantly below the previous month’s figure of 0.5%. The US Core PCE Price Index remained steady at 0.3%, in line with the estimates and the last month’s figures, indicating stable inflation in the country. Meanwhile, the US Employment Cost Index showed an increase of 1.2% (q/q), outperforming the forecast of 1.1% and demonstrating a growth compared to the previous quarter’s 1.0%.
What does it mean for the Asia Session?
The USD/JPY could continue its ascent above 136.00 towards 137.00, provided the upcoming Japanese Final Manufacturing PMI and Consumer Confidence figures disappoint.
Meanwhile, the AUD could continue to struggle against the USD on a consecutive decline in Commodity Prices y/y, which showed the first drop last week since 2021.
The Dollar Index (DXY)
Key news events today
ISM Manufacturing PMI
What can we expect from DXY today?
The ISM Manufacturing PMI is a leading indicator of economic health, and its release often significantly impacts the USD. With a previous reading of 46.3 and a forecasted figure of 46.8, an above-forecast reading may boost the USD, while a below-forecast reading could weaken it.
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?
With US inflation remaining stable at 0.3%, gold prices could weaken as it is typically viewed as a hedge against inflation.
Next 24 Hours Bias
Mixed
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The AUD may experience a mixed impact based on the upcoming data releases. The MI Inflation Gauge is forecasted to increase by 0.3%, indicating a rise in inflationary pressure, which could lead to a potential increase in the value of the AUD. However, the ANZ Job Advertisements are forecasted to decrease by 2.4%, indicating a weakening job market. The Commodity Prices y/y are expected to reduce by 9.1%, which may negatively impact the Australian economy.
Central Bank Notes:
- Kept the cash rate unchanged at 3.60%
- Full impact of previous interest rate hikes is yet to be felt.
- Inflation in Australia has peaked, and the central forecast is to decline this year, at around 3% in mid-2025.
- Further tightening of monetary policy may be necessary to achieve the 2 – 3% inflation target
- Next meeting on 2 May 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?
China’s Manufacturing PMI fell to 49.2 from a forecasted 51.4 and the previous 51.9, indicating contraction. Non-Manufacturing PMI rose to 56.4 from a forecasted 57.0 and the last 58.2, indicating growth. These releases may have a mixed impact on the NZD, with reduced demand for exports due to a contraction in manufacturing and increased demand for services due to non-manufacturing growth.
Central Bank Notes:
- OCR increased by 50bps from 4.75% to 5.25%
- Recent severe weather events in the North Island have led to higher prices, increasing the risk of inflation expectations exceeding the target range.
- New Zealand’s economic growth is expected to slow through 2023 due to the slowing global economy, reduced residential building activity, and the ongoing effects of monetary policy tightening.
- Next meeting is on 25 May 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 Final Manufacturing PMI figure of 49.5 suggests a contraction in the manufacturing sector, which could negatively affect the JPY currency if it indicates an overall economic slowdown. However, the expected improvement in Consumer Confidence from 33.9 to 34.7 could positively impact the JPY currency by increasing consumer spending and boosting economic growth.
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 EUR currency price direction is expected to draw from the upcoming data, namely the CPI Flash Estimate y/y and the Core CPI Flash Estimate y/y due to a bank holiday in the country today. The CPI Flash Estimate y/y is predicted to increase slightly from 6.9% to 7.0%, while the Core CPI Flash Estimate y/y is forecasted to decrease slightly from 5.7% to 5.6%.
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?
Due to a bank holiday in the country today, the price direction for the CHF will likely draw from the upcoming Manufacturing PMI data forecasted at 47.2 (previous 47.0). Any significant deviation from market expectations could lead to changes in the value of 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?
Today’s GBP’s price direction may depend on the upcoming Nationwide House Price Index m/m data as the country observes a bank holiday. The forecasted data indicates a decline of 0.5%, while the previous month’s data showed a decrease of 0.8%.
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?
There are no significant news events expected to impact the CAD today. Hence, the direction of the CAD price is likely to be influenced by the previously released dismal GDP m/m data at 0.1% (forecast 0.2%, last 0.5%).
Central Bank Notes:
- Bank of Canada holds its target for the overnight rate at 4.5%
- Labour markets remain tight with persistent price pressures, especially for services
- Economic growth in Q1 looks to be stronger than projected; to be weak through the remainder of this year before strengthening gradually next year
- Prepared to increase the policy rate further to return inflation to the 2% target.
- Next meeting on 7 June 2023
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The recent decrease in U.S. crude oil production to 12.5 million barrels per day and the rise in fuel demand to nearly 20 million barrels per day suggests a potential shift in the oil market. This change could lead to an increase in oil prices due to reduced supply and higher demand.
Next 24 Hours Bias
Weak Bullish
