IC Markets Europe Fundamental Forecast | 3 April 2023
What happened in the Asia session?
The second-tier data releases from Japan show a mixed picture, highlighted by the Final Manufacturing PMI, which reported a level of 49.2. This figure is higher than the forecasted and previous levels of 48.6 but remains below the 50 mark, indicating contraction.
Australian MI Inflation Gauge m/m actual was 0.3%, lower than the 0.4% forecast. Building Approvals m/m increased by 4.0% (forecast 10.4%, previous -27.1%). China’s Caixin Manufacturing PMI decreased to 50.0 (forecast 51.4, last 51.6). These developments can be expected to impact the AUD. negatively
What does it mean for the Europe & US Sessions?
The bullish gap in the price of WTI experienced a retracement. If prices stay above $78/bbl, the black gold will likely retest the prior session highs around $81.50/bbl. Successful bulls would move on to tag January’s highs near $83/bbl. Otherwise, the current retracement may drop to around $76/bbl gap support.
The Dollar Index (DXY)
Key news events today
ISM Manufacturing PMI
What can we expect from DXY today?
The ISM Manufacturing PMI data (forecast 47.5, p[previous 47.7) may negatively impact USD slightly as the forecast is lower than the last and less than 50, signalling a continuation of contraction in the manufacturing sector.
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?
The lower-than-expected US Core PCE Price Index m/m suggests that inflationary pressures may be easing, potentially hurting the price of gold as investors may not view gold as a hedge against low inflation.
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 may be influenced by the Caixin Manufacturing PMI data release from China, Australia’s largest trading partner. The forecasted data of 51.4 indicates a slight decrease from the previous month’s data of 51.6. A drop in manufacturing activity could reduce demand for Australian exports, which may negatively impact the AUD.
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 event today for the currency, so the Kiwi’s price direction is likely to draw from the upcoming NZIER Business Confidence data, with a reading of -70. If the release shows a further decline in sentiment, it could weigh heavily on the 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?
JPY may have a mixed impact on upcoming data releases. Tankan Manufacturing Index is forecasted to increase from 3 to 7, potentially strengthening JPY. Tankan Non-Manufacturing Index and Final Manufacturing PMI are expected to remain unchanged at 20 and 48.6, respectively, with limited impact on JPY.
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?
The impact on the EUR based on the upcoming data releases is mixed, as some indicators are expected to show contraction, while others are expected to remain unchanged. The Spanish Manufacturing PMI is seen to fall to 50.1 from 50.7, and Italian Manufacturing PMI to 51.1 from 52.0. However, the German Final Manufacturing PMI and the overall Final Manufacturing PMI for the Eurozone are expected to remain unchanged at 44.4 and 47.1, respectively.
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
CPI m/m
What can we expect from CHF today?
Forecasted and previous CPI m/m data for Switzerland suggests a possible slight decrease, with a predicted value of 0.4% (previous 0.7%). Lower inflation levels could decrease demand for CHF, leading to a short-term drop.
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
Weak Bearish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
UK’s upcoming Final Manufacturing PMI data release is forecasted to remain unchanged at 48.0, the same as the previous data. This is unlikely to have a significant impact on 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
BOC Business Outlook Survey
What can we expect from CAD today?
If the actual value of the upcoming Canadian Manufacturing PMI data release exceeds the previous value of 52.4, it could signal an increase in manufacturing activity and a potential boost for the CAD. A positive BOC Business Outlook Survey outlook could also strengthen the CAD.
signal confidence in the economy
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
Bullish
Oil
Key news events today
OPEC-JMMC Meetings
What can we expect from Oil today?
OPEC+ oil producers, led by Saudi Arabia, have announced a surprise voluntary production cut of around 1.15m bpd ahead of the virtual meeting of a ministerial panel, which includes Saudi Arabia and Russia. The cartel had been expected to stick to its agreed 2m bpd cuts.
Next 24 Hours Bias
Bullish
