IC Markets Europe Fundamental Forecast | 26 April 2023
What happened in the Asia session?
The Australian CPI figures for Q1 2023 were mixed, with the actual CPI q/q figure slightly better than expected at 1.4% but lower than the previous figure of 1.9%. The CPI y/y figure came in at 6.3%, lower than the forecasted figure of 6.5% and the last figure of 6.8%, and the Trimmed Mean CPI figure was also lower than expected at 1.2%. These figures may weigh on the AUD.
The NZ Trade Balance figure came in worse than expected at -1273M, while Credit Card Spending y/y was significantly lower than the previous figure at 20.3%. These developments are likely to weaken the NZD against other currencies.
What does it mean for the Europe & US Sessions?
The mixed Australian CPI data will likely see AUD/USD break below 0.6600. The upcoming US Durable Goods Orders m/m data could lower the pair to the proposed target at 0.6560. In parallel, NZD/USD could test the 0.6100 figure.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The upcoming release of US Core Durable Goods Orders m/m data is forecasted to decrease by -0.2%. The Durable Goods variant will increase by 0.7%, following a previous month’s decline of -1.0%. If the forecasted figures are realised, it could suggest a slowdown in demand for long-lasting goods, negatively impacting 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
Mixed
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The weaker-than-expected US CB Consumer Confidence index may positively impact the price of gold in the short term. As the data suggests a potential weakness in the US economy, investors may turn to gold as it is often seen as a hedge against economic uncertainty and inflation.
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?
The Australian CPI q/q is predicted to be 1.3%, lower than the previous release of 1.9%. Similarly, the CPI y/y is expected to decrease slightly from 6.8% to 6.6%. Additionally, the Trimmed Mean CPI q/q is forecasted to fall from 1.7% to 1.4%, which could further reinforce the potential slowdown in inflation. This, in turn, may hurt the currency, as the RBA is expected to adopt a less hawkish stance on the interest rate trajectory.
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 upcoming data releases for NZD include Trade Balance and Credit Card Spending y/y. The forecasted Trade Balance is -500M, an improvement from the previous data of -714M, which could positively impact the currency. Likewise, a continued increase in Credit Card Spending y/y (last 25.6%) could also positively affect the Kiwi.
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?
Today, no major news event is expected to impact the JPY significantly. The price direction is likely to be mixed, drawn from previously released data, specifically the SPPI y/y data, which came in at 1.6% (lower than the previous and forecasted figures of 1.7%), and the BOJ Core CPI y/y data, which came in at 2.9% (higher than the last and projected figures of 2.7% and 2.6%, respectively).
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 release of the German GfK Consumer Climate data will impact the EUR positively. The forecasted data of -28.0 is slightly better than the previous data of -29.5, indicating a potential improvement in consumer sentiment in Germany.
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?
A continued drop in the upcoming Credit Suisse Economic Expectations (previous -41.3) could hurt the Swiss franc. An expectation decline suggests traders need more confidence in the economy’s growth prospects.
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 Bearish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The upcoming release of the CBI Realized Sales data in the UK might lead to positive sentiment towards the GBP. The forecasted figure of 4 (previous 1) indicates a slight increase in sales activity.
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 Bullish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
If the BoC Summary of Deliberations suggests a stable economic outlook and easing inflation, the Canadian dollar may drop in value. On the other hand, if the report indicates heightened inflation concerns, the Canadian dollar may rise.
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 forecasted data release for Crude Oil Inventories is expected to show a decrease of 1.3 million barrels, lower than the previous decrease of 4.6 million. This suggests a tightening of the supply of crude oil, potentially leading to higher oil prices due to strong demand.
Next 24 Hours Bias
Weak Bullish
