IC Markets Europe Fundamental Forecast | 18 April 2023
What happened in the Asia session?
According to the RBA minutes, members discussed whether to increase the cash rate by 25 basis points while acknowledging that some households were already drawing on their savings. The case for not changing monetary policy rested on the observation that monetary policy had already been tightened significantly in a short period, and its impact on the economy was uncertain.
Meanwhile, Chinese GDP q/y surprised with a 4.5% (forecast 4.0%, previous 2.9%)
What does it mean for the Europe & US Sessions?
The AUD/USD pair is still expected to head higher towards 0.6765 based on the relatively positive development on the home & trading partner fronts.
The Loonie could also outperform and extend its intra-day uptrend towards 1.3500. Positive development in the Canadian CPI data set could underpin the move.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The forecasted figures for Building Permits and Housing Starts suggest a decrease compared to the previous period, with Building Permits at 1.46M versus 1.52M and Housing Starts at 1.40M versus 1.45M, respectively. This indicates a potential slowdown in the US construction industry, which could negatively affect the economy and the USD.
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?
According to recent statements, some Federal Reserve officials are still considering further interest rate hikes to combat inflation. This could impact the price of gold, which tends to rise during high inflation but may fall if the US dollar strengthens.
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 RBA Monetary Policy Meeting Minutes are anticipated to provide insights into the central bank’s future monetary policy path, with hawkishness to benefit the AUD. Meanwhile, China’s upcoming GDP figures, forecasted at 4.0% q/y (previously 2.9%), could impact the AUD due to China being Australia’s largest trading partner.
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 GDT Price Index is crucial for New Zealand’s economy as it is a significant export. Any further declines from the previous figure of -4.7% in the index could lead to a decrease in demand for the NZD, while a recovery could increase demand for the currency.
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?
As there is no important news concerning the JPY today, its price direction is likely to be influenced by Wednesday’s revised Industrial Production m/m data. It is expected to show a rate of 4.5%, which aligns with the forecasted and previous data.
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 German ZEW Economic Sentiment data is set to be released, with the forecasted value showing an increase from the previous reading of 13.0 to 15.5. If the actual data release meets or exceeds this predicted value, it could increase demand for the Euro as investors become more optimistic about the economic outlook.
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?
The Swiss Franc is anticipated to have a calm trading session today, as no significant news events will likely impact the currency.
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 Claimant Count Change is expected to show an increase of 10.2K compared to the previous decrease of 11.2K. This data release is a crucial indicator of the health of the UK labour market and can impact the value of the GBP in the short term. A higher number of people claiming unemployment benefits suggests weakness in the labour market, which can lead to reduced economic growth and lower demand for 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
CPI m/m
Median CPI y/y
Trimmed CPI y/y
What can we expect from CAD today?
The upcoming data releases for Canadian CPI m/m, Median CPI y/y, and Trimmed CPI y/y are expected to significantly impact the currency’s value. The respective previous values are 0.4%, 4.9%, and 4.8%. Higher inflation rates in Canada may lead to a more hawkish stance by the Bank of Canada.
Central Bank Notes:
- Bank of Canada holds its target for the overnight rate at 4.5%
- Labour markets remain tight with persistent price pressures, especially for services
- Economic growth in Q1 looks to be stronger than projected; to be weak through the remainder of this year before strengthening gradually next year
- Prepared to increase the policy rate further to return inflation to the 2% target.
- Next meeting on 7 June 2023
Next 24 Hours Bias
Mixed
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The fear of higher interest rates and a stronger US dollar due to the US Federal Reserve’s plan to tighten monetary policy has raised concerns about the oil demand.
Next 24 Hours Bias
Weak Bearish
