IC Markets Asia Fundamental Forecast | 17 April 2023
What happened in the US session?
The sentiment conveyed by the US data releases last Friday was mixed. The actual values were higher than the forecasted values for Preliminary UoM Consumer Sentiment and lower for Core Retail Sales m/m and Retail Sales m/m.
What does it mean for the Asia Session?
The retaliation from the US dollar in the second half of the US session will likely spill over as the fundamental data releases for this session are largely mixed. NZD stands to lead the pack against the greenback through a bounce from the round figure support of 0.6200, provided backing comes from BusinessNZ Services Index and the FPI m/m meeting forecasts.
The Dollar Index (DXY)
Key news events today
Empire State Manufacturing Index
What can we expect from DXY today?
The upcoming forecasted value for the Empire State Manufacturing Index is -17.7, an improvement from the previous value of -24.6. A positive could lead to increased demand for the US dollar, indicating a manufacturing sector recovery.
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 Bullish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The US yields and the increasing probability of a 25-bps rate hike by the Fed in May (now at 80% from 40% a month ago) are expected to have a mixed impact on gold. Higher interest rates could increase the opportunity cost of holding gold, but they could also support gold prices 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 Australian CB Leading Index m/m data is expected to remain at 0.0%, indicating that the Australian economy will likely maintain its current growth momentum. However, the lack of positive growth could impact the currency built in the short term. A stagnant CB Leading Index m/m could signal a lack of economic growth and decrease demand for the AUD. Conversely, if the data exceeds expectations, it could boost investor confidence and increase demand for the AUD.
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?
The BusinessNZ Services Index reading of 55.8 in the previous release indicated expansion in the service sector. If the upcoming release shows further improvement, it could positively impact NZD. On the other hand, the FPI m/m reading of 1.5% in the previous release could increase inflationary pressures if it comes in higher than expected. This may cause the Reserve Bank of New Zealand to raise interest rates, making NZD more attractive to investors.
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 Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
No major news event exists for the JPY currency today, so the upcoming data releases will likely influence its price direction. The revised Industrial Production m/m data is set to be released on Wednesday, with the forecasted and previous data showing an expected rate of 4.5%. If the actual data deviates significantly from the forecast, it may impact the demand on JPY accordingly.
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?
ECB President Lagarde is set to speak at the Council on Foreign Relations C. Peter McColough Series on International Economics in New York. Her remarks on the Eurozone will likely impact the shared currency, with a hawkish tone to positively impact the EUR.
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?
Today’s trading session for the Swiss Franc CHF is expected to be quiet, with no major news events affecting the currency.
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?
MPC member Jon Cunliffe is scheduled to speak at the Innovative Finance Global Summit in London. Any surprising announcements or new information about the MPC’s plans during his speech could significantly impact GBP.
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?
The forecasted value for Foreign Securities Purchases is 6.28B, higher than the previous value of 4.21B, which could increase foreign investment in Canadian securities, positively affecting the CAD. However, the forecasted value for Wholesale Sales m/m is -1.6%, lower than the previous value of 2.4%, suggesting a decrease in CAD demand due to a potential drop in wholesale goods sales.
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 IEA predicts global oil demand will rise to 101.9 million barrels per day this year, with China leading the economic surge among developing nations. This is 2 million barrels per day, higher than last year’s figure. However, the agency warns that the recent decision by major oil exporters to cut their production could drive oil prices higher, which would negatively impact efforts to reduce inflation and reset economic growth in developed countries.
Next 24 Hours Bias
Weak Bullish
