IC Markets Europe Fundamental Forecast | 13 June 2023
What happened in the Asia session?
New Zealand Visitor Arrivals plunged by 16.9%, surpassing the previous 1.0% drop, potentially weakening the NZD due to reduced foreign inflow.
In contrast, the Australian Dollar faces mixed prospects; a surprise 0.2% rise in Westpac Consumer Sentiment may uplift the AUD, but a disappointing -4 in NAB Business Confidence could dampen its value.
The Japanese Yen could strengthen following a better-than-expected BSI Manufacturing Index of -0.4 against the predicted -4.2.
What does it mean for the Europe & US Sessions?
A lower-than-expected US CPI data set could cause the US dollar to drop below the tested support at 103.30. In this scenario, the psychological level at 103.00 will be challenged, and successful bears will aim for 102.70. Alternatively, stronger-than-expected consumer prices could boost the USD to 104.00 since it will boost the chances of the Fed continuing on its rate hike path.
The Dollar Index (DXY)
Key news events today
CPI m/m
CPI y/y
Core CPI m/m
What can we expect from DXY today?
The forecasted figures suggest a 0.2% increase in CPI m/m, a 4.1% increase in CPI y/y, and a 0.4% increase in Core CPI m/m. The previous data recorded a higher growth of 0.4% for CPI m/m and 4.9% for CPI y/y, while Core CPI m/m remained consistent at 0.4%. The impact on the USD will depend on how the data aligns with the forecasted figures, with higher-than-expected CPI likely to boost the dollar.
Central Bank Notes:
- The committee raised the target range for the federal funds rate to 5 to 5-1/4 per cent. The U.S. banking system is sound and resilient.
- Tighter credit conditions for households and businesses may weigh on economic activity, hiring, and inflation.
- The committee is committed to returning inflation to its 2% objective
- The committee will adjust monetary policy as appropriate if risks emerge that could impede the attainment of goals
- Next meeting is on 14 June 2023
Next 24 Hours Bias
Mixed
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
If the upcoming US CPI data falls below expectations, indicating lower inflationary pressures, it could hurt gold prices. Conversely, if the data surpasses expectations, suggesting higher inflation, it could boost the demand for gold.
Next 24 Hours Bias
Mixed
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The Westpac Consumer Sentiment Index, which fell -7.9% last month, and the National Australia Bank’s (NAB) Business Confidence index, which stood at 0, are due. Continuing poor consumer sentiment could pressure the AUD downwards, while any rise in business confidence might support it. If both indices improve, the AUD could benefit, but disappointing data could lead to a drop.
Central Bank Notes:
- The RBA increased the cash rate target by 25 basis points to 4.10%.
- Inflation in Australia has passed its peak but remains high at 7% and needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting on 4 July 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 forthcoming New Zealand Visitor Arrivals m/m data release is crucial, as a previous -2.9% decrease indicated a contraction in tourism, a vital economic sector. A further decrease could lower the New Zealand Dollar’s value due to less tourism spending. However, if the data shows a rebound in tourism, it could support the currency’s strength.
Central Bank Notes:
- The Monetary Policy Committee has raised the OCR from 5.25% to 5.50%
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the target range while supporting maximum sustainable employment
- The Committee voted by a majority of five to two to increase the OCR by 25 basis points to 5.50%
- Interest rates must remain restrictive to ensure inflation returns to the target range while supporting maximum sustainable employment
- Next meeting is on 12 July 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 BSI Manufacturing Index for JPY is expected to show a forecasted value of -4.2, an improvement from the previous value of -10.5. If the data matches or exceeds the forecast, it could positively impact the JPY. This suggests a potential recovery or stabilisation in the manufacturing sector, which may attract foreign investment and strengthen the JPY against other currencies.
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 15 June 2023
Next 24 Hours Bias
Weak bullish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The upcoming release of the German ZEW Economic Sentiment data, which is expected to decline from -10.7 to -13.4, is likely to have a notable impact on the euro (EUR). Negative sentiment among institutional investors and analysts regarding the German economy’s outlook can lead to reduced investor confidence, lower foreign investment, and weakened demand for the euro. This may result in the euro depreciating against other major currencies.
Central Bank Notes:
- The ECB has decided to raise the three key interest rates by 25 basis points as the inflation outlook continues to be too high for too long.
- The ECB will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
- Renewed financial market tensions and Russia’s war against Ukraine remain significant economic downside risks.
- The continued resilience of the labour market could lead to higher growth than anticipated.
- Next meeting on 15 June 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?
No significant news events will impact the Swiss Franc today. As a result, the price direction of CHF is likely to be influenced by Thursday’s data releases. The forecasted PPI m/m data suggests a 0.1% PPI m/m increase. Additionally, the SECO Economic Forecasts, which provide insights into Switzerland’s economic outlook, will be released.
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
Mixed
The Pound (GBP)
Key news events today
Claimant Count Change
What can we expect from GBP today?
The upcoming data release for the UK is the Claimant Count Change, which is forecasted to decrease by 21.4K compared to the previous release of 46.7K. It may indicate an improving labour market, economic stability, and increased investor confidence, potentially strengthening the GBP.
Central Bank Notes:
- The MPC of the BoE voted 7-2 to increase Bank Rate by 0.25 percentage points to 4.5%.
- The updated projections show that CPI inflation is expected to decline slightly above 1% at the two and three-year horizons, below the 2% target.
- CPI increased unexpectedly but is expected to fall sharply over the rest of the year due to lower energy prices.
- Next meeting on 22 June 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?
Today, there was no major news event impacting the CAD. Therefore, Thursday’s data releases will likely influence the currency’s price direction. The essential data to watch include Housing Starts, with a previous figure of 262K and a forecasted figure of 239K, and Manufacturing Sales m/m, with an earlier growth of 0.7% and a predicted decline of -0.2%. These figures will provide insights into the housing market and manufacturing sector, potentially affecting the CAD’s performance.
Central Bank Notes:
- The Bank of Canada increased its target for the overnight rate to 4.75%.
- Canada’s economy was more substantial than expected in the first quarter of 2023, with GDP growth of 3.1%.
- The Bank expects CPI inflation to ease to around 3% in the summer, but concerns have increased about inflation staying above the 2% target.
- Next meeting on 12 July 2023
Next 24 Hours Bias
Mixed
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Crude benchmarks settled at their lowest levels in months, influenced by the Goldman Sachs price forecast cut and the upcoming US Federal Reserve meeting. Additionally, market participants eagerly await the release of OPEC and IEA outlooks, which are expected to provide insights into global oil supply and demand dynamics.
Next 24 Hours Bias
Weak bearish
