IC Markets Europe Fundamental Forecast | 6 April 2023
What happened in the Asia session?
The ANZ Commodity Prices m/m was reported at 1.3%, slightly lower than the forecasted value of 1.4%. This release could have a mildly negative impact on the NZD.
Australia’s Trade Balance came in at 13.87B, higher than the forecasted 11.33B and the previous value of 11.27B. Moreover, China’s Caixin Services PMI was higher than the predicted and prior values, potentially positively influencing the AUD.
What does it mean for the Europe & US Sessions?
With the Canadian unemployment numbers forecasted to be worse than the numbers from the US, the USD/CAD pair is likely to see a test of the 1.3500 psychological resistance. Sustained bullishness on the USD, or weakness from the CAD, could see the pair seek 1.3560 before the holidays.
The Dollar Index (DXY)
Key news events today
Unemployment Claims
What can we expect from DXY today?
According to the forecasted data of 200K, the number of individuals filing for unemployment benefits is expected to increase from the previous data of 198K. This suggests a slightly weaker labour market and could lead to a decrease in the value of 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?
RBNZ’s surprise 50-bps hike to 5.25% makes holding non-yielding assets like gold less attractive. However, inflation concerns may counteract this, as investors may turn to gold as a hedge against rising inflation.
Next 24 Hours Bias
Mixed
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
China’s Caixin Services PMI data, with a forecasted value of 55.0, is expected to impact the AUD due to the close trading relationship between China and Australia. If the actual value exceeds the forecast, it could boost demand for Australian exports and support the AUD.
The upcoming release of the Australian Trade Balance data is expected to have a minor impact on the currency, as the forecasted value of 11.33B is slightly lower than the previous value of 11.69B.
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
No major news events.
What can we expect from NZD today?
A continued increase in the ANZ Commodity Prices m/m data release (previous 1.3%) may lead to a short-term rise in NZD’s value.
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 upcoming 30-year bond auction is expected to impact the JPY moderately. A higher yield for the bond auction than the previous yield of 1.42% may increase demand for Japanese government bonds, strengthening the yen.
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 Bullish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The upcoming German Industrial Production m/m release is expected to decrease to -0.1% (previous 3.5%). This may hurt the EUR as it indicates a potential slowdown in the German manufacturing sector, which could affect the overall Eurozone economy.
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 Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
A higher-than-expected level of reserves (previous 771B) would suggest that the SNB may have intervened in the currency markets to maintain a strong Swiss France. This could lead to an appreciation of the CHF against other currencies.
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
Mixed
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The Halifax HPI m/m is expected to show a decline of 0.5%, compared to the previous month’s increase of 1.1%. The Construction PMI is also expected to decrease slightly from 54.6 to 53.4, indicating slowing growth in the construction sector. However, the Housing Equity Withdrawal q/q is expected to increase by 2.3B, compared to the previous quarter’s decline of -5.8B. Overall, the impact of these data releases on the GBP could be mixed.
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
Mixed
The Canadian Dollar (CAD)
Key news events today
Employment Change
Unemployment Rate
What can we expect from CAD today?
If the upcoming employment change data release (expected 10.2K) comes in below the previous release (previous 21.8K), it could weaken the CAD as it suggests a slowdown in the labour market. Likewise for the Unemployment Rate (forecast 5.1%, last 5.0%)
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 Inventories data for the week ending on April 1, 2023, was -3.7M barrels, better than the forecasted -1.6M barrels and the previous week’s -7.5M barrels. A decrease in the measure indicates increasing demand and can lead to a rise in crude oil prices.
Next 24 Hours Bias
Bullish
