IC Markets Europe Fundamental Forecast | 20 April 2023
What happened in the Asia session?
The CPI q/q for NZD was lower than expected at 1.2%, causing a decrease in demand for NZD. Meanwhile, neighbouring NAB Quarterly Business Confidence was worse than expected at -4, potentially pressuring the AUD.
The Tertiary Industry Activity m/m for JPY was higher than expected at 0.7%, while the Trade Balance was better at -1.21T, potentially increasing demand for JPY.
What does it mean for the Europe & US Sessions?
The EUR/USD pair will likely trade within a 100-pip range between 1.0900 and 1.1000 before the release of the US Unemployment Claims.
The Loonie will likely continue its intra-day uptrend towards 1.3500. A hawkish tone from the BoC Governor Macklem today would reinforce the bullish scenario.
The Dollar Index (DXY)
Key news events today
Unemployment Claims
What can we expect from DXY today?
The forecasted data for the upcoming release of Unemployment Claims indicate that there may not be a significant impact on the USD. The predicted value of 240K is slightly higher than the previous 239K, suggesting that any increase in unemployment claims may be minimal.
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
Mixed
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
St. Louis Federal Reserve Chief, James Bullard, has stated that the Fed should continue to raise interest rates due to persistent inflation, with markets now pricing an 85% chance of a 25bps rate hike at the May 2-3 meeting. This announcement has put pressure on the price of gold, which is likely to have a negative impact as higher interest rates make other investments more attractive, reducing the demand for gold.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
RBA Gov Lowe Speaks
What can we expect from AUD today?
Investors will closely monitor any comments from Governor Lowe regarding the economy and the RBA’s monetary policy in the scheduled media briefing about the Review of the RBA in Sydney.
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
CPI q/q
What can we expect from NZD today?
The forecasted data for the CPI q/q in New Zealand suggests a slight increase of 0.1% from the previous quarter’s figure of 1.4% to 1.5%. If the actual data release matches the forecast, it may have a limited impact on the NZD. However, if the actual CPI q/q figure exceeds the forecast, it could positively impact the NZD, while a figure below the estimates may lead to a negative impact.
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 forecasted figure for Trade Balance is -1.70T, indicating a decrease from the previous figure of -1.19T JPY, which may weaken the JPY. Moreover, the forecasted figure for Tertiary Industry Activity is 0.4% m/m (previous 0.9%), indicating slowing growth in Japan’s service sector.
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 impact of the upcoming data releases from the Eurozone is mixed. Notably, the German PPI m/m is expected to decrease to -0.6% from the previous figure of -0.3%, while the Trade Balance figure is forecasted to improve to -8.5B from the last figure of -11.3B.
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
No major news events.
What can we expect from CHF today?
SNB’s Schlegel commented on the possibility of further interest rate hikes to control Swiss inflation, which he considers high compared to international standards. This could increase demand for CHF.
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
Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The GBP price direction will likely be influenced by previously released CPI y/y; The 10.1% CPI y/y figure is higher than the forecasted value of 9.8% but lower than the previous 10.4%. This suggests that the rate of inflation in the UK is still high but may be starting to stabilise or decrease slightly. The Bank of England may need to raise interest rates immediately to address inflation.
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
Bullish
The Canadian Dollar (CAD)
Key news events today
BOC Gov Macklem Speaks
What can we expect from CAD today?
BoC Governor Macklem and Senior Deputy Governor Rogers are set to testify before the Standing Senate Committee on Banking, Commerce and the Economy in Ontario. The CAD may experience volatility as a result, as the testimony may provide insights into the central bank’s assessment of the economy, including its outlook for growth and inflation.
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 Crude Oil Inventories show a decrease of 4.6 million barrels versus a decline of 0.4 million barrels forecasted and an increase of 0.6 million previously. These numbers suggest tightening the supply situation in the short term, which could increase oil prices.
Next 24 Hours Bias
Weak Bullish
