What happened in the US session?
In his semi-annual testimony before the US Senate, Fed Chair Jerome Powell announced that the central bank is prepared to accelerate the pace of interest rate hikes. This announcement saw the US dollar experience a significant rally.
What does it mean for the Asian Session?
The impact of RBA Governor Lowe’s words on the AUD is mixed, with a potential reduction in demand due to a pause, but a commitment to the inflation target could support the long term. That said, the currency will likely be tagged for shorts building up to the words from ECB President Lagarde and Fed Chair Powell later today.
The Dollar Index (DXY)
Key news events today
ADP Non-Farm Employment Change
Fed Chair Powell Testifies
JOLTS Job Openings
What can we expect from DXY today?
US ADP Non-Farm Employment Change shows a forecasted increase of 197K jobs (previously 106K), potentially strengthening the USD. Fed Chair Powell’s testimony and JOLTS Job Openings data release (10.58M, previously 11.01M) may also impact the currency.
Central Bank Notes:
- The Committee has raised the federal funds rate target range to 4.5-4.75% and plans to continue increasing it to return inflation to 2%
- The Committee will monitor incoming information and adjust the stance of monetary policy as appropriate to achieve its goals
- A majority vote from the Committee supported the decision to raise the target range
- Next meeting is on 23 March 2023
Next 24 Hours Bias
Mixed
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
Fed Chair Powell’s probable intention to accelerate interest rate hikes is expected to put downward pressure on the price of gold, as it increases the opportunity cost of holding non-yielding assets like gold.
Next 24 Hours Bias
Bearish
The Australian Dollar (AUD)
Key news events today
RBA Gov Lowe Speaks
What can we expect from AUD today?
RBA Governor Lowe said the central bank might pause interest rate increases as monetary policy moves into restrictive territory. However, further tightening is still needed to bring inflation back to target.
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
Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
No major news for NZD today, so previously released data likely influences price direction. GDT Price Index fell by 0.7% in the latest auction, following a 1.5% decline in the previous auction, indicating weakness in the dairy market that could put downward pressure on NZD.
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
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Current Account data for Japan is expected at 0.8T JPY (prev. 1.18T JPY)—a potential negative impact on JPY in the short term due to a decrease in the current account surplus.
Central Bank Notes:
- Cash rate stands at -0.1%
- Expanded range for 10-year JGB yield fluctuations to 0.5%
- Next meeting is on 8 March 2023
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
ECB President Lagarde Speaks
What can we expect from EUR today?
Eurozone GDP for Q4 2022 is expected to stay at 1.9% YoY. German Retail Sales in January are predicted to fall by 6.1% YoY (previous -6.4%). ECB President Lagarde’s speech will likely add upside volatility for the shared currency if she remains hawkish on the rate hike trajectory.
Central Bank Notes:
- Main Refinancing Rate is currently at 3.00%
- ECB Governing Council to continue raising interest rates and reducing holdings of securities
- Future policy decisions to be data-dependent
- Next meeting on 16 March 2023
Next 24 Hours Bias
Weak Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
In his latest speech about the Swiss economy and monetary policy, SNB Chairman Thomas Jordan says their economic policy is too loose. They may tighten it through interest rates and currency intervention to stabilise prices.
Central Bank Notes:
- Current policy rate is at 1.00%
- Next meeting on 23 March 2023
Next 24 Hours Bias
Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
As there is no major news event for GBP today, GBP direction is likely influenced by previously released Halifax HPI m/m data showing better than expected 1.1% increase instead of the forecasted -0.3% decrease and previous 0.2% increase. The buoyant housing market may increase demand for GBP.
Central Bank Notes:
- MPC voted to increase Bank Rate by 0.5 percentage points to 4%
- Near-term data developments are crucial in assessing how quickly external and domestic inflationary pressures will abate
- MPC’s updated projections show CPI inflation falling back sharply from its current level
- Next meeting on 23 March 2023
Next 24 Hours Bias
Weak Bullish
The Canadian Dollar (CAD)
Key news events today
BOC Rate Statement
Overnight Rate
What can we expect from CAD today?
The BOC Rate Statement is likely dovish and could impact the CAD negatively. The overnight rate at 4.50% is expected to remain the same.
Central Bank Notes:
- Increased rates to 4.50%; indicated pause of future rate hikes
- Inflation in Canada is projected to drop to around 3% in the middle of 2023
- Goal is to reach the 2% inflation target by 2024
- Next meeting on 8 March 2023
Next 24 Hours Bias
Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Fed Chair Powell’s mention of further acceleration in interest rate hikes has caused a significant rally in the US dollar, which could lead to downward pressure on oil prices and broader implications for the global economy. The Fed chief is scheduled to testify again later today.
Next 24 Hours Bias
Weak Bearish
