IC Markets Europe Fundamental Forecast | 3 May 2023
What happened in the Asia session?
The Employment Change q/q for NZD is at 0.8%, higher than the forecasted and previous values of 0.5%. The Unemployment Rate for NZD is at 3.4%, lower than the predicted initial values of 3.5% and 3.4%, respectively. These positive trends in the job and labour markets can lead to an appreciation of the NZD against other currencies.
Conversely, the Retail Sales m/m for AUD is at 0.4%, higher than the forecasted and previous values of 0.2%. This suggests increased consumer spending, economic growth, and inflation, leading to an appreciation of the AUD.
What does it mean for the Europe & US Sessions?
The USD is likely to consolidate further ahead of the FOMC decision. The Antipodeans’ weakness against the greenback is more evident than their European counterparts. Volatility spikes can indeed be expected upon the release of the US interest rate data set.
The Dollar Index (DXY)
Key news events today
ADP Non-Farm Employment Change
ISM Services PMI
FOMC Statement
Federal Funds Rate
FOMC Press Conference
What can we expect from DXY today?
The ADP Non-Farm Employment Change is forecasted to increase from 145K to 148K, potentially strengthening the job market. The ISM Services PMI is also predicted to increase from 51.2 to 51.8, suggesting an expansion in the service sector.
The Federal Funds Rate is expected to increase from 5.00% to 5.25%, which could attract foreign investors seeking higher returns and boost the USD. The FOMC Statement and Press Conference will provide further insight into the Federal Reserve’s economic and monetary policy outlook.
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 Bullish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The FOMC Statement and Press Conference will provide further insight into the Federal Reserve’s economic and monetary policy outlook. Any signals that the Fed may continue to raise interest rates could suppress the price of gold.
Next 24 Hours Bias
Mixed
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The upcoming release of Retail Sales m/m data for Australia is expected to show no change from the previous month’s figure of 0.2%. Overall, the impact on the AUD currency is likely to be moderate.
Central Bank Notes:
- The Official Cash Rate was increased by 25 basis points to 3.85%.
- Inflation in Australia has passed its peak but remains high at 7%, and it may take some time to return to the target range.
- GDP is forecast to increase by 1.25% this year and around 2% over the year to mid-2025.
- Next meeting on 6 June 2023
Next 24 Hours Bias
Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The upcoming Employment Change q/q release for NZD is expected to be higher than the previous quarter, with a forecast of 0.5% compared to the last quarter’s 0.2%, which suggests potential growth in the New Zealand economy and may have a positive impact on the NZD currency. However, the forecasted Unemployment Rate for NZD is expected to remain at 3.5%, which may not significantly affect the currency.
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?
Due to bank holidays, no significant news is expected from Japan over the next three days.
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 Italian Monthly Unemployment Rate is forecasted to remain unchanged at 8.0%, the same as the previously reported data. This could indicate a stagnant job market in Italy and hurt the Euro. Conversely, the Unemployment Rate for the Eurozone is also expected to remain unchanged at 6.6%, providing some stability for the shared currency.
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?
The Swiss Franc is not expected to be influenced by any major news event today. Therefore, the direction of the currency is likely to be determined by the previously released economic data. Switzerland’s SECO Consumer Climate index stands at -30, below the forecasted value of -22 and the same as the previous reading. Additionally, the Manufacturing PMI for Switzerland is 45.3, below both the predicted value of 47.2 and the last reading of 47.0. These weaker-than-anticipated readings may negatively impact the CHF and lead to a decline in value.
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
Mixed
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
No major news events affect the GBP, so its price direction is expected to be influenced by upcoming economic data releases. The Final Services PMI is forecasted to be 54.9, the M4 Money Supply m/m is predicted to be 0.2%, Mortgage Approvals are forecasted to be 46K, and Net Lending to Individuals m/m is indicated to be 2.8B. If the actual data meets or exceeds the predicted figures, it may strengthen the GBP, while falling short may weaken it.
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
No major news events.
What can we expect from CAD today?
There is no major news event for the Canadian dollar today, so upcoming economic data releases will likely influence its price direction. The Ivey PMI is forecasted to be 59.0, up from the previous figure of 58.2. On the other hand, the forecasted figure for Canada’s Trade Balance is 0.3 billion, down from the prior figure of 0.4 billion.
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 0.5 million barrels, compared to the previous week’s data which indicated a larger decline of 5.1 million barrels. This suggests a potential reduction in the supply of crude oil in the market, which could increase oil prices.
Next 24 Hours Bias
Mixed
