IC Markets Europe Fundamental Forecast | 25 April 2023
What happened in the Asia session?
Japan’s Services Producer Price Index (SPPI) y/y change for March was 1.6%, slightly lower than the forecasted and previous figures of 1.7%. The BOJ’s Core CPI y/y change for March was 2.9%, higher than the forecasted and earlier figures of 2.6% and 2.7%, respectively. The higher BOJ Core CPI figure suggested inflationary pressure, which could prompt the BOJ to lean less dovish, making the JPY more attractive to traders.
What does it mean for the Europe & US Sessions?
Unless the upcoming US CB Consumer Confidence surprise significantly to the upside, the technical recovery rally of the USD in the Asia session is not likely to continue against the other major currencies during forthcoming sessions.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The projected and past data for the CB Consumer Confidence report indicates that the USD is likely to experience a mild effect. The forecasted figures reveal a slight drop from the previous month’s reading of 104.2 to 104.1, indicating that consumers’ confidence in the economy remains relatively high. Nonetheless, since the shift is insignificant, it is improbable that the currency will be considerably impacted.
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?
Fed Governor Lisa Cook’s recent comments about the uncertain phase of monetary policy have created a bullish sentiment for gold, traditionally considered a safe-haven asset during economic uncertainty and inflation concerns.
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?
Due to a bank holiday in the country today, the AUD price direction will likely draw from the upcoming CPI data. The data set is expected to come in lower than last, indicating a decrease in inflation, potentially leading to lower demand for the currency.
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
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The NZD’s price direction is expected to be influenced by the upcoming Trade Balance data, as there is a bank holiday in the country today. The previous Trade Balance data showed a deficit of -714M, worse than the forecasted deficit of -500M, indicating that imports exceeded exports by a more considerable margin than expected.
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
Weak Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The forecasted SPPI y/y is 1.7%, slightly lower than the previous value of 1.8%, indicating a slight decrease in demand for JPY. Conversely, the BOJ Core CPI y/y is expected to be 2.6%, slightly lower than the previous value of 2.7%, suggesting a potential increase in demand for the JPY due to decreased interest rates. Overall, the impact of these data releases on the JPY is expected to be moderate.
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?
There is no significant news from the Eurozone today; hence the EUR price direction may draw from previously released data. German ifo Business Climate increased to 93.6, higher than forecasted and previous values, indicating business optimism in Germany, which could lead to increased investment and positively impact the EUR.
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 upcoming release of Switzerland’s Trade Balance data is forecasted to increase to 4.20B from the previous month’s 3.31B. This could positively impact the Swiss franc due to a higher demand for Swiss exports, leading to a stronger 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
Weak Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The forecasted figure for UK Public Sector Net Borrowing is 20.5B, higher than the previous 15.9B, indicating a potential decrease in investor confidence and a weaker GBP. Meanwhile, the CBI Industrial Order Expectations forecast of -21 is only slightly worse than the previous figure of -20, which may not significantly impact the 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
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
No major news for CAD today, so price direction is likely influenced by previously released NHPI m/m data reported at 0.0% (forecasted 0.1%, previous -0.2%). The result suggests no significant changes in the Canadian housing market.
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 positive outlook for China’s travel and fuel demand during the May Day holiday could continue injecting optimism into the oil market to see the recovery rally extend.
Next 24 Hours Bias
Weak Bullish
