IC Markets Europe Fundamental Forecast | 17 March 2023
What happened in the Asian session?
As expected, the AUD outperformed other major currencies based on recent solid labour data.
On the data front, the latest Tertiary Industry Activity report in Japan indicates a 0.9% growth, surpassing the 0.5% forecast and the previous month’s -0.4% contraction. This positive outcome suggests a more robust service sector and may lead to a stronger JPY as investor confidence in the Japanese economy grows.
What does it mean for the Europe & US Sessions?
Inflation-related data from Europe and the UK will likely be the focus before the US Preliminary UoM Consumer Sentiment. However, concerns over the banking crises in the US and Europe, although they seem to be waning, could overshadow the economic figure should more banks come forward to confess their troubles.
The Dollar Index (DXY)
Key news events today
Prelim UoM Consumer Sentiment
What can we expect from DXY today?
A higher-than-expected Preliminary UoM Consumer Sentiment Index release, with a forecast of 67.0 and a previous figure of 66.9, may positively impact USD and vice versa. Two versions of this data, Preliminary and Revised, are released 14 days apart. The Preliminary release, being earlier, typically has a more significant impact.
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?
The hawkish ECB and combined efforts to prevent a banking crisis from spreading may reduce safe-haven demand for the non-interest-bearing metal.
Next 24 Hours Bias
Bearish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
Without significant news, the AUD’s value may be driven higher by the recent positive labour data, with 64.6K jobs added (Forecast 49.7K, Previous -10.9K) and a 3.5% Unemployment Rate (Forecast 3.6%, Previous 3.7%).
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 Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
NZD’s direction is likely to draw from previously released data, with -0.6% GDP q/q compared to forecasted -0.2% and previous 1.7%, potentially weakening commodity-linked currency.
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?
Japan’s Tertiary Industry Activity m/m is expected to rise by 0.5% (prev. -0.4%). This could positively impact JPY due to its significant contribution to the Japanese GDP (approx. 70%) and suggest overall economic expansion.
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
No major news events.
What can we expect from EUR today?
Eurozone’s Final CPI y/y is expected to decrease from 8.6% to 8.5%, while the Final Core CPI y/y is expected to remain the same at 5.6%. Should the data set come in lower than expected, the recent hawkish seen in the ECB may be mildly tamed.
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 Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
Swiss economic growth in 2023 is expected to be significantly below average at 1.1%, rising to 1.5% in 2024. The slowdown is also anticipated to affect the Swiss labour market with a lag, with unemployment projected to reach 2.3% in 2024.
Central Bank Notes:
- Current policy rate is at 1.00%
- Next meeting on 23 March 2023
Next 24 Hours Bias
Bearish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
Higher UK Consumer Inflation Expectations, previously at 4.8%, may prompt the Bank of England (BoE) to tighten monetary policy, strengthening the GBP. Conversely, a lower figure could weaken the GBP since this development would reinforce BoE’s intentions to pause rate hikes sooner than expected.
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
Mixed
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
The lower-than-expected figures from second-tier data, namely the Foreign Securities Purchases, IPPI m/m and RMPI m/m, may weaken the CAD.
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
Weak Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The infusion of liquidity by the US and European central banks and major US banks to stem the liquidity crisis will likely provide stability to the banking sector and ease concerns over a potential mass banking crisis. This could help reduce uncertainty and volatility in the oil market.
Next 24 Hours Bias
Weak Bullish
