IC Markets Asia Fundamental Forecast | 24 April 2023
What happened in the US session?
The US Flash Manufacturing PMI came in at 50.4, higher than the forecasted value of 49.0 and the previous reading of 49.2. Likewise, the Flash Services PMI came in at 53.7, beating the predicted value of 51.5 and the last reading of 52.6. These developments indicate expansion in the US Manufacturing and services sectors’ business conditions.
What does it mean for the Asia Session?
The data-light session will likely see consolidative moves. However, the USD bulls may take the early basing as a springboard to eke further gains from the surprise expansion in manufacturing activities registered by the US Flash Manufacturing PMI.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
There is no major news event from the US today, so previously released data will likely influence the price direction. Positive developments on the Flash Manufacturing PMI and Flash Services PMI fronts could push the USD higher.
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 positive data on the US Flash Manufacturing and Services PMI indicate an expansion in the business conditions in the US economy, which could lead to a stronger US dollar and, consequently, a decrease in the demand for safe-haven assets such as gold. As a result, the short-term impact on gold could be negative.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The AUD is expected to remain stable today due to the absence of any significant news event. The previously released data likely influenced the price direction, particularly the mixed Flash Manufacturing PMI figure of 48.1 and the Flash Services PMI figure of 52.6, indicating expansion in the services sector.
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 NZD’s value may be influenced by economic data released earlier without any major news events. Traders may pay attention to the quarterly Consumer Price Index (CPI) figure, last reported at 1.2%, lower than the expected 1.5% and the previous reading of 1.4%.
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?
Today’s Yen’s price direction is expected to be driven by upcoming data releases, as no significant news events affect the currency. Specifically, traders will anticipate the Services Producer Price Index (SPPI) y/y figure, forecasted to be 1.7%, slightly lower than the previous reading of 1.8%. The BoJ Core CPI y/y figure is also expected to remain at 2.6%.
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?
A better German ifo Business Climate data figure, significantly higher than the forecasted data for the upcoming release at 93.4 (previous 93.3), could lead to increased demand for the EUR. Conversely, significantly worse actual data can decrease investor confidence, decreasing demand.
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 will occur for the CHF currency today, so the upcoming release of Trade Balance data will likely influence its price direction. The forecasted Trade Balance data indicates an increase from 3.31B to 4.20B, which could positively impact the currency’s price direction if proven accurate.
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
Weak Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
A positive figure for the upcoming Rightmove House Price Index (HPI) m/m data (previous 0.8%) would indicate a positive trend in the UK’s property market that could boost the UK’s economy and lead to an increase in the value of the 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
Weak Bullish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
The upcoming NHPI (New Housing Price Index) m/m data release is forecasted to show a 0.1% increase, a positive sign for the currency. The previous data showed a decrease of -0.2%. If the predicted data materialises, it could increase demand for CAD as it would suggest a healthy housing market.
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 Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Oil prices will likely continue to be plagued by recession concerns amid the recent news from Baker Hughes indicating that US drillers have added oil and gas rigs for the first week in four. The increases in rigs suggest a potential rise in oil production.
Next 24 Hours Bias
Weak Bearish
