IC Markets Asia Fundamental Forecast | 13 April 2023
What happened in the US session?
The US CPI m/m actual figure of 0.1% was lower than the forecasted value of 0.2%, while the CPI y/y at 5.0% was significantly lower than the previous value of 6.0%, suggesting stabilising inflation that could potentially lead to a decrease in the USD. The Core CPI m/m figure of 0.4% aligned with the forecasted value.
The Bank of Canada left the Overnight Rate unchanged at 4.50%.
What does it mean for the Asia Session?
Upcoming Australian and Chinese data releases should centre traders’ focus on the antipodeans. Favourable developments for the AUD/USD and NZD/USD pairs will likely continue upward due to stabilising US inflation to prior session highs of 0.6720 and 0.6240, respectively.
The Dollar Index (DXY)
Key news events today
Core PPI m/m
PPI m/m
Unemployment Claims
What can we expect from DXY today?
The USD may experience mixed effects based on the upcoming data releases. The Core PPI m/m forecasted data of 0.2% represents a slight uptick in inflationary pressures. However, the PPI m/m forecasted data of 0.0% indicates a lack of price pressures in the production sector. The predicted data for Unemployment Claims of 233K represents a slight weakening in the labour market.
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
Mixed
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The recent release of US CPI figures shows a lower-than-expected monthly price increase, suggesting stabilising inflation. This development may have a mixed impact on gold, as a weakening USD may increase demand for gold as a hedge against currency fluctuations. However, stabilising inflation may reduce its appeal as an inflation hedge.
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 see a mixed impact from upcoming data releases on the country’s labour market. The forecasted data for Employment Change shows a decrease from 64.6K to 20.8K. However, the forecasted Unemployment Rate is expected to worsen from 3.5% to 3.6%.
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?
Chinese data releases will likely influence the NZD as China is one of New Zealand’s largest trading partners. The upcoming release of China’s Trade Balance is expected to show a surplus of 275B, significantly lower than the previous reading of 810B. Meanwhile, the USD-Denominated variant is forecasted to come in at 40.0B, down from the last reading of 116.9B. A lower-than-expected trade surplus in China could signal a weaker demand for New Zealand’s exports.
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
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The forecasted value of 2.5% for the M2 Money Stock y/y in Japan is slightly lower than the previous value of 2.6%, suggesting that the Japanese economy may be growing slower than anticipated. This could lead to a decrease in demand for 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
Weak Bearish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The upcoming data releases for EUR include German Final CPI at a forecasted 0.8%, Italian Industrial Production expected to rebound to 0.5% from the previous -0.7%, and a predicted increase in Industrial Production m/m for the Eurozone to 0.9%. The Spanish 10-y Bond Auction may impact the EUR depending on the auction result, and German Buba President Nagel speaking may offer insight into the country’s monetary policy.
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?
The ongoing IMF meetings will likely affect the Swiss Franc’s volatility, given the lack of any CHF-specific news until the release of the PPI m/m on Friday.
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
Mixed
The Pound (GBP)
Key news events today
BOE Gov Bailey Speaks
What can we expect from GBP today?
The upcoming release of the UK’s GDP m/m data is expected to decrease from 0.3% to 0.1%, indicating the economy’s growth rate is slowing. This could hurt the value of GBP, as investors may be less inclined to hold it if they anticipate weaker economic performance.
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
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
BOC Gov Macklem Speaks
What can we expect from CAD today?
The BoC Governor, Tiff Macklem, will deliver a speech on Canadian economic growth and inflation at the IMF Spring Meetings in Washington, DC. The chief is likely to reiterate the stance of holding rates steady for its latest monetary policy decision.
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
Mixed
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The weaker USD due to a stabilising inflation environment should continue to lead to the rise in oil prices due to the increased demand for the commodity. The surprise build in Crude Oil Inventories of 0.6m (forecast -1.0m, last -3.7m) may limit gains somewhat.
Next 24 Hours Bias
Weak Bullish
