IC Markets Europe Fundamental Forecast | 30 March 2023
What happened in the Asia session?
The ANZ Business Confidence data for New Zealand is -43.4, while the previous value was -43.3, suggesting that business confidence in New Zealand has declined slightly in the given period.
What does it mean for the Europe & US Sessions?
A higher-than-expected German Prelim CPI m/m could bring the EUR/USD out of consolidation towards the recent highs of around 1.0930. Likewise, better than expected figures for the US Final GDP q/q Unemployment Claims could see the pair head towards 1.0750
The Dollar Index (DXY)
Key news events today
Final GDP q/q
Unemployment Claims
What can we expect from DXY today?
The forecasted and previous data show no change in the US final GDP q/q at 2.7%. However, Unemployment Claims are expected to increase from 191K to 196K. This could indicate weakness in the labour market and the overall economy, 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
Weak Bearish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The latest CPI y/y for Australia showed a consecutive drop, suggesting an easing global inflation situation and potentially leading to a decrease in gold prices.
Next 24 Hours Bias
Weak Bearish
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. The price direction could draw from the previous CPI y/y data release, which showed a consecutive drop to 6.8%.
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?
The NZ Building Consents m/m data showed a 9.0% decline, far below the previous figure of 5.2%. This suggests a slowdown in the construction industry and may lead to a depreciation in the NZD. A drop in the upcoming release of the ANZ Business Confidence (previous -43.3) could exacerbate a downward price movement.
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?
There is no major news event for JPY today, so price direction may depend on expectations for upcoming data releases. Tokyo Core CPI y/y is expected at 3.1%, down from the previous 3.3%. The anticipated drop in consumer prices could lead to a decline in JPY.
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
German Prelim CPI m/m
What can we expect from EUR today?
The forecasted data is 0.6%, slightly lower than the previous month’s figure of 0.8%. If the actual figure comes in below the forecast, it may signal lower inflationary pressures but could lead only to a slight decrease in the value of the EUR since the ECB expressed hawkishness even amid the banking crisis.
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?
As there is no major news event for the currency today, the price direction of CHF is likely to draw from the previously released Credit Suisse Economic Expectations data that showed a value of -41.3 (previous -12.3). This indicates that there has been a significant drop in economic expectations over the given time frame, which could lead to a decrease in the value of 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 11 April 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?
MPC member Mann’s speech stated that reducing UK services inflation from 6% to 2% will be challenging, causing uncertainty and potentially reducing GBP’s value against other major currencies. The long-term impact is still being determined, but the BoE’s strong track record of managing inflation will likely prevent significant changes, despite the persistent core inflation remaining.
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?
Governor Council Member Gravelle suggests large-scale GOC bond purchases if faced with severe dysfunction, while Canada’s well-regulated financial system may still be affected by global events. Support for the system would be provided in times of widespread stress.
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
Mixed
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Crude Oil Inventories decreased by 7.5M barrels, surpassing the forecasted and previous numbers of 1.8M and 1.1M barrels, respectively. This implies a reduction in supply and could lead to increased oil prices.
Next 24 Hours Bias
Bullish
