IC Markets Europe Fundamental Forecast | 23 March 2023
What happened in the Asian session?
As expected, the USD is still experiencing weakness following the relatively dovish view on the Fed’s tightening cycle amid the recent banking turmoil in the US and Europe.
What does it mean for the Europe & US Sessions?
The central banks’ monetary policy decisions by the SNB and the BoE will be the highlight of the sessions. The former is expected to hike rates by 50bps to 1.5%, while the latter is anticipated to increase the Official Bank Rate to 4.25% from 4.00%. Simultaneous releases of the Policy Assessment/Summary for each bank, respectively, would drive the volatility for CHF and GBP. A shift in the MPC Official Bank Rate Votes would also cause speculations on the BoE’s intentions going forward.
The Dollar Index (DXY)
Key news events today
Unemployment Claims
What can we expect from DXY today?
The upcoming release of US unemployment claims data, with a forecast of 198K (previous 192K), is slightly higher than the last reading. Still, more than this difference is needed to cause a significant shift in the currency’s value.
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?
As the ongoing tightening cycle in the US seems to be approaching, the opportunity cost of holding non-yielding assets like gold stabilises. This could lead to an increase in the demand for gold and a subsequent rise in its price.
Next 24 Hours Bias
Weak Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
No major news event for AUD today. CB Leading Index m/m shows a 0.0% change from the previous month’s -0.1%. Lack of improvement suggests poor economic growth, potentially leading to a negative outlook for AUD.
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 Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
No major news event for the NZD today means that the currency’s price direction will likely draw from the previously released mixed data – GDT Price Index (-2.6%, previous -0.7%), Westpac Consumer Sentiment (77.7, last 75.6).
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
Mixed
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Due to the absence of significant news events concerning the JPY today, the currency’s price trajectory is anticipated to be impacted by the movements of its safe-haven counterpart, the US Dollar.
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 upcoming Eurozone Consumer Confidence data release slightly improved from -19 to -18. The actual release meeting or exceeding the forecast could lead to a positive impact on the Euro.
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
SNB Monetary Policy Assessment
SNB Policy Rate
SNB Press Conference
What can we expect from CHF today?
The policy rate is anticipated to rise by 50 basis points to 1.50%. The Monetary Policy Assessment and Press Conference’s hawkish tone could favour the CHF, whereas a dovish tone could decrease its value.
Central Bank Notes:
- Current policy rate is at 1.00%
- Next meeting on 23 March 2023
Next 24 Hours Bias
Mixed
The Pound (GBP)
Key news events today
MPC Official Bank Rate Votes
Monetary Policy Summary
Official Bank Rate
What can we expect from GBP today?
The BoE is anticipated to increase in Official Bank Rate from 4% to 4.25%, while the MPC Official Bank Rate Votes should have a neutral impact on GBP, with 7-0-2 forecasted. The Monetary Policy Summary can significantly impact currency with a positive outlook increasing demand and value, and a dovish view decreasing demand and value.
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?
No major news event for CAD today, so its price direction may draw from previously released data. NHPI m/m figure for Canada is -0.2%, worse than the forecasted -0.1% but the same as the previous figure. This suggests a slight decline in new home prices and could put downward pressure on 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 crude oil inventory level is reported at 1.1 million barrels, higher than the forecasted inventory level of -1.7 million barrels but lower than the previous inventory level of 1.6 million. This indicates that there has been an increase in crude oil inventories, which could lead to a drop in the price of crude oil.
Next 24 Hours Bias
Weak Bearish
