IC Markets Asia Fundamental Forecast | 28 March 2023
What happened in the US session?
BoE Governor Bailey warns of additional tightening if UK inflation persists. The latest UK Consumer price inflation is currently at 10.4%, while the target is 2%. The chief added that recent economic data suggests resilience.
What does it mean for the Asian Session?
Risky assets are likely to remain in favour amid the banking turmoil containment following the acquisition of the failed SVB by First Citizens Bank. However, shorting the safe havens such as Gold and JPY may yield better intraday returns since the upcoming data release for the AUD is expected to be unfavourable.
The Dollar Index (DXY)
Key news events today
CB Consumer Confidence
What can we expect from DXY today?
Since November 2022, the Consumer Confidence Index of the Conference Board has been on a downward trend, dropping from 111.3 to 102.9 by February 2023, marking a decline of 8.4%. The next release is expected to read 101.0. If the actual release is higher than the projection, it implies that consumer confidence has increased, potentially boosting investor optimism and positively affecting the USD.
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?
BoE Governor Bailey’s warning of additional tightening if UK inflation persists (currently at 10.4% vs target 2%) reflects the stance of most global central banks. If central banks continue to raise interest rates, gold prices may drop as investors seek higher returns on other assets.
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 upcoming release of Retail Sales m/m in Australia is expected to show a smaller increase of 0.2% compared to the previous month’s significant increase of 1.9%. This could hurt the AUD as it suggests a slowdown in consumer spending, a crucial driver of economic growth.
Central Bank Notes:
- Cash rate raised by 25 basis points to 3.60%.
- Board prioritises returning inflation to target, with a likely need for further monetary policy tightening.
- Board to closely monitor the global economy, household spending trends, inflation and labour market outlook when assessing interest rate increases.
- Next meeting on 4 April 2023
Next 24 Hours Bias
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
No major news events for NZD today, with direction expected to draw from upcoming data releases on Thursday. Previous readings on Building Consents m/m and ANZ Business Confidence are 1.5% and -43.3, respectively.
Central Bank Notes:
- Monetary Policy Committee increased the OCR from 4.25% to 4.75%
- Higher interest rates are needed to reduce inflation and support employment sustainably
- Severe storms in North Island will increase inflation and disrupt production.
- Next meeting is on 5 April 2023
Next 24 Hours Bias
Mixed
The Japanese Yen (JPY)
Key news events today
BOJ Gov Kuroda Speaks
What can we expect from JPY today?
BOJ Gov Kuroda’s speech at FIN/SUM 2023 in Tokyo may impact JPY value if he hints at monetary policy changes or discusses challenges to the Japanese economy. On the data front, BOJ Core CPI y/y is forecasted to decrease from 3.1% to 3.0%. JPY may fall if the expectation is confirmed and increase if an unexpected rise occurs.
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 Bullish
The Euro (EUR)
Key news events today
ECB President Lagarde Speaks
What can we expect from EUR today?
The upcoming speech by ECB President Lagarde at the opening ceremony of the Bank of International Settlements Innovation Hub Eurosystem Centre in Frankfurt may have a significant impact on the EUR. Suppose Lagarde reaffirms the central bank’s hawkish stance on the fight against persisting inflation, a rally in the EUR can be expected.
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?
Amid a lack of data releases from Switzerland, CHF’s price direction may draw from Wednesday’s SNB Quarterly Bulletin, which provides insights into the Swiss economy and monetary policy. A more hawkish tone is good for the currency, but its impact is typically mild due to information released earlier in the Monetary Policy Assessment.
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?
BoE Governor Bailey and Deputy Governor David Ramsden are scheduled to appear before the Treasury Select Committee in London to provide testimony regarding the collapse of Silicon Valley Bank.
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?
Traders for CAD will look to upcoming data releases, specifically the Annual Budget Release, on Wednesday, as there are no major news events today. Domestic spending and borrowing levels impact the economy and currency, making the budget release important.
Central Bank Notes:
- Bank of Canada maintains its target for the overnight rate at 4.5%
- Inflation eased in January, but price increases for food and shelter remain high
- BOC is prepared to increase the policy rate further to return inflation to the 2% target.
- Next meeting on 12 April 2023
Next 24 Hours Bias
Mixed
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Kurdistan’s export halt may reduce global oil supply, driving up prices. With First Citizens acquiring the failed SVB, optimism in the banking industry could increase oil demand, further fuelling yesterday’s rise.
Next 24 Hours Bias
Bullish
