IC Markets Asia Fundamental Forecast | 16 November 2023
What happened in the US session?
Retail sales in the US decreased by 0.1% MoM as sales at furniture stores, miscellaneous store retailers and motor vehicles and parts dealers led the fall. Although sales declined for the first time in seven months, October’s figures fell less than originally anticipated.
Meanwhile, the Producer Price Index (PPI) – which measures wholesale inflation – declined on a monthly and annualised basis, with both the headline and core readings printing lower than their respective estimates.
Both of these data points were released at the same time and caused a short-term jump in the value of the dollar index (DXY). The DXY bounced from 104.00 to 104.50 by the middle of the US.
What does it mean for the Asia Session?
Australia’s Labour Force report is due to be released today and October’s estimate shows a gain of 22.8k jobs while the unemployment rate edges higher from 3.6% to 3.7%. Stronger-than-expected employment figures are likely to provide a lift for the Aussie.
The Dollar Index (DXY)
Key news events today
Unemployment Claims (1:30 pm GMT)
Industrial Production (2:15 pm GMT)
What can we expect from DXY today?
Unemployment claims have edged higher over the past three weeks, signalling potential cracks in the US labour market. The current forecast of 221k points to another week of increase. Should claims print higher than 221k, the greenback is likely to come under heavy selling pressure.
Industrial production grew steadily in the second half of 2023 but October’s estimate points to a decline of 0.4% MoM. Not only would this mark the first decline in four months, it would also be the steepest fall since June. A larger than anticipated decline in production would negatively impact the dollar.
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
Medium Bullish
Gold (XAU)
Key news events today
Unemployment Claims (1:30 pm GMT)
Industrial Production (2:15 pm GMT)
What can we expect from Gold today?
Unemployment claims have edged higher over the past three weeks, signalling potential cracks in the US labour market. The current forecast of 221k points to another week of increase. Should claims print higher than 221k, the greenback is likely to come under heavy selling pressure.
Industrial production grew steadily in the second half of 2023 but October’s estimate points to a decline of 0.4% MoM. Not only would this mark the first decline in four months, it would also be the steepest fall since June. A larger than anticipated decline in production would negatively impact the dollar and thus provide a boost for gold prices.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
Labour Force Report (12:30 am GMT)
What can we expect from AUD today?
Australia’s Labour Force report is due to be released today and October’s estimate shows a gain of 22.8k jobs while the unemployment rate edges higher from 3.6% to 3.7%. Stronger-than-expected employment figures are likely to provide a lift for the Aussie.
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
Strong Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi is one of the weakest currencies this morning as it hit a low of 0.6000 and is likely to remain under pressure during the Asia and Europe sessions. Poor economic data from the US could potentially lift this currency in the latter part of the day.
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
Strong Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Following the short-lived bounce in the greenback, USD/JPY climbed as high as 151.40 overnight but reversed to trade around 151.20 as Asian markets came online. This currency pair could remain under pressure for most parts of today.
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
Weak Bullish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The recent sell-off in the US dollar has provided a strong lift for the Euro. Should US economic data come in ‘soft’ once more later today, further gains can be expected for this currency.
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 Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
Following the sell-off in the greenback, USD/CHF dropped as low as 0.8855 yesterday and this currency pair is likely to drift lower today.
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
Weak Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The Pound pulled back quite sharply overnight to fall as low as 1.2405. With demand for the greenback waning this morning, this currency could find support around the 1.2400-level before climbing higher.
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
Medium Bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
A weak US dollar drove USD/CAD as low as 1.3655 overnight but this currency pair was rising towards the 1.3700-mark at the start of the Asia session. With crude prices remaining depressed today, the Canadian could weaken further and cause USD/CAD to move higher.
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?
EIA crude oil inventories came in higher at 3.6M barrels of crude versus the forecast of 2.5M. A stronger than expected inventory build typically signals weaker demand in the US. WTI oil rose as high as $78.50 per barrel yesterday before reversing sharply and looks set to fall under $76.00 as Asian markets come online.
Next 24 Hours Bias
Medium Bearish
