IC Markets Europe Fundamental Forecast | 8 September 2023
What happened in the Asia session?
The dollar index (DXY) has been falling in the Asia session, and since DXY and Gold have a negative correlation, Gold is rising towards a resistance level. DXY fell due to the previous bearish divergence that was present, and hence Gold, EUR and GBP pairs rose.
What does it mean for the Europe & US sessions?
The German consumer price inflation rate moderated to 6.1% YoY in August 2023, a marginal decline from 6.2% in the previous month based on the preliminary estimate. Should the final reading print lower than the estimate, this could cause the Euro to weaken.
Canada’s equivalent of the US NFPs will be released today and could have a major impact on the direction of USD/CAD. The unemployment rate has increased over the past three months with the latest rate at 5.5% – the latest estimate for the month of August points to another increase to 5.6%. Canada’s labour market has lost jobs in two out of the last three months but the forecast for August indicates a return to growth with approximately 19k jobs to be added to the labour market.
The Dollar Index (DXY)
Key news events today
FOMC Member Barr Speaks (1:00 pm GMT)
What can we expect from DXY today?
Federal Reserve Governor Michael Barr is due to participate in a moderated discussion at the Federal Reserve Bank of Philadelphia Seventh Annual Fintech Conference where he may drop clues on the upcoming FOMC meeting next week. His remarks could have a major impact on the direction of the DXY.
Central Bank Notes:
- The federal funds rate target range will be 5.25% to 5.50%.
- The Committee is strongly committed to returning inflation to its 2.0% target.
- The Committee will adjust monetary policy if risks emerge that could hinder achieving its goals.
- Various factors will be considered, including labour market conditions, inflation pressures, inflation expectations, and international and financial developments.
- Next meeting runs from 19 to 20 September 2023.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
FOMC Member Barr Speaks (1:00 pm GMT)
What can we expect from Gold today?
Federal Reserve Governor Michael Barr is due to participate in a moderated discussion at the Federal Reserve Bank of Philadelphia Seventh Annual Fintech Conference where he may drop clues on the upcoming FOMC meeting next week. His remarks could have a major impact on the direction of the DXY and thus drive gold prices as well.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The Aussie was in a range in the morning, and was not able to break past the range. However, AUD/USD finally broke past the resistance and we can expect it to continue rising towards a resistance level.
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.10% for the third consecutive meeting.
- Inflation in Australia has passed its peak and is trending lower but needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting on 3 October 2023.
Next 24 Hours Bias
Medium Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi was in consolidation, and since Kiwi moves similarly to the Aussie as well, Kiwi broke past the consolidation zone, and is now rising towards a resistance level. We can expect bullishness for Kiwi in the next 24 hours.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the 1% to 3% target range while supporting maximum sustainable employment.
- Headline inflation and inflation expectations have declined but the core reading remains too high.
- Next meeting is on 4 October 2023.
Next 24 Hours Bias
Medium Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Since there are no major news events today, there are no significant movements as of this afternoon. The only notable movement was the retest to the neckline of the double top pattern that was formed. We could potentially see USD/JPY fall further since this double top pattern indicates a bearish reversal.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2.0%.
- The Bank of Japan decided on the following measures:
- Yield curve control: Negative interest rate of -0.1% on policy-rate balances and purchase of Japanese government bonds to keep 10-year JGB yields around +0.5%.
- Inflation is expected to decelerate temporarily but is projected to accelerate moderately later, supported by improvements in the output gap and inflation expectations.
- Japan’s economy is expected to recover gradually.
- Next meeting is on 22 September 2023.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
German CPI (6:00 am GMT)
What can we expect from EUR today?
The German consumer price inflation rate moderated to 6.1% YoY in August 2023, a marginal decline from 6.2% in the previous month based on the preliminary estimate. Should the final reading print lower than the estimate, this could cause the Euro to weaken.
Central Bank Notes:
- The ECB raised the three key interest rates by 25 basis points.
- Economic growth projections have been slightly lowered.
- The Governing Council will ensure interest rates are sufficiently restrictive to achieve the inflation target and keep them at those levels as long as needed.
- Rate decisions will be data-dependent, considering inflation outlook, economic data, underlying inflation dynamics, and monetary policy transmission strength.
- Next meeting on 14 September 2023.
Next 24 Hours Bias
Medium Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
USD/CHF has been bearish since this morning, and we can expect USD/CHF to continue dropping further to a support level since we are expecting DXY to continue its bearish momentum.
Central Bank Notes:
- SNB has tightened its monetary policy further, raising the SNB policy rate by 0.25 percentage points to 1.75%.
- The new forecast predicts average annual inflation at 2.2% for 2023 and 2024 and 2.1% for 2025. Without the rate increase, the estimates would be even higher.
- SNB predicts modest growth for the rest of the year due to subdued foreign demand, loss of purchasing power from inflation, and stricter financial conditions. The GDP is projected to grow around 1.0% this year.
- Next meeting on 21 September 2023.
Next 24 Hours Bias
Medium Bearish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The Pound was bullish in the morning, and looked promising to rise towards the 1st resistance, however, we can see a slight pullback as GBP/USD broke past a minor resistance level, and could possibly pullback before rising towards a key pullback resistance level.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted to increase the Bank Rate by 0.25 percentage points to 5.25%.
- One member preferred to maintain the Bank Rate at 5.0% while another two preferred to increase it by 0.5 percentage points.
- CPI inflation is expected to fall significantly to around 5% by the end of the year, accounted for by lower energy prices but services price inflation is projected to remain elevated in the near term.
- The updated projections show that CPI inflation is expected to decline to 2.0% and 1.9% at the two and three-year horizons respectively.
- Next meeting on 21 September 2023.
Next 24 Hours Bias
Medium Bullish
The Canadian Dollar (CAD)
Key news events today
Employment Change (12:30 pm GMT)
Unemployment Rate (12:30 pm GMT)
What can we expect from CAD today?
Canada’s equivalent of the US NFPs will be released today and could have a major impact on the direction of USD/CAD. The unemployment rate has increased over the past three months with the latest rate at 5.5% – the latest estimate for the month of August points to another increase to 5.6%. Canada’s labour market has lost jobs in two out of the last three months but the forecast for August indicates a return to growth with approximately 19k jobs to be added to the labour market.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%.
- Canada’s economy was more substantial than expected in the second quarter of 2023, with GDP growth of 3.3%.
- The Bank expects CPI inflation to ease to around 3.0% in the summer, but concerns have increased about inflation staying above the 2.0% target.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The actual data for the EIA Crude Oil Inventories was -6.307M as compared to the forecast of -2.064M, which indicates a larger decrease in crude oil inventories. This means that there has been a more significant reduction in the stockpile of crude oil than what analysts had expected.
Although the most recent data indicated a larger-than-anticipated reduction in U.S. inventories during the week ending September 1st, analysts expressed doubts about the continuation of robust demand in the upcoming weeks, particularly with the conclusion of the travel-intensive summer season.
Crude prices fell 0.2% to $89.61 a barrel, while WTI oil fell 0.4% to $86.56 a barrel.
Next 24 Hours Bias
Medium Bearish
