IC Markets Europe Fundamental Forecast | 11 April 2023
What happened in the Asia session?
The Australian Westpac Consumer Sentiment increased by 9.4% (previous 0.0%), while the NAB Business Confidence report showed a reading of -1 (previous -4). However, the Chinese CPI for March 2023 was 0.7% (forecast 1.0%), and the PPI was -2.5% (forecast -2.5%). These lower figures suggest decreased inflationary pressures and production costs in China, which could reduce demand for the AUD. Overall, the impact on the AUD is mixed.
What does it mean for the Europe & US Sessions?
Since currency-specific data releases are still scheduled, ideal pairs to trade for the European session include AUD/USD, USD/JPY and EUR/USD. The trends established during the session could be exacerbated by the planned speeches of FOMC committee members in the second half of the US session.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The upcoming release of the NFIB Small Business Index is forecasted to show a decline from the previous reading of 90.9 to 89.6. This decrease could hurt the value of the USD, as it may signal a weakening in the economy and a potential reduction in investor confidence.
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 IMF’s recent analysis has predicted that interest rates will soon return to pre-pandemic levels. This may lead to advanced economies approaching the “zero lower bound”, while developing countries may experience a gradual decline in rates. These developments may impact the gold market as rising interest rates can decrease demand for gold as investors may shift towards other investments with higher yields.
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 direction of the AUD’s price may be influenced by the release of the upcoming Westpac Consumer Sentiment report (previous 0.0%) and the NAB Business Confidence report (previous -4). In the event of positive reports, there is a possibility that the AUD could receive a boost.
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 upcoming data releases for China, including CPI, PPI, New Loans, and M2 Money Supply, will likely impact the NZD as China is New Zealand’s largest trading partner. Overall, the upcoming Chinese data releases are mixed, with some indicators suggesting stability and others pointing to a continued slowdown.
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
Mixed
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The upcoming release of the Preliminary Machine Tool Orders y/y data (previous -10.7%), considered a leading indicator of the manufacturing industry, is expected to negatively impact the Japanese yen if a continued decline in this data materialises.
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 Bearish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The Sentix Investor Confidence and Retail Sales m/m data are expected to decline from the previous reading of -11.1 to -12.8 and 0.3% to -0.8%, respectively, potentially hurting 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
Weak Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The volatility for the Swiss Franc will likely draw from the ongoing IMF meetings since CHF-specific news, the PPI m/m, will only be reported this Friday.
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
No major news events.
What can we expect from GBP today?
The BRC Retail Sales Monitor y/y data release for GBP showed actual, forecasted, and previous figures of 5.1%, 5.1%, and 4.9%, respectively. However, since the actual data matches the predicted data, the impact on the GBP currency will likely be limited.
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?
As there is no major news event for the Canadian dollar today, the price direction will likely be influenced by upcoming data releases, particularly those related to the BOC’s monetary policy. The Overnight Rate is expected to remain at 4.5%.
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?
The price fluctuation of WTI remains confined to a range of three dollars. If the consolidation is resolved, the outcome could be a rise towards the November 2022 high of approximately $93 or a decline to the daily gap support at around $76.
Next 24 Hours Bias
Mixed
