IC Markets Asia Fundamental Forecast | 10 April 2023
What happened in the US session?
Last Friday’s data releases for the US labour market show a 0.3% increase in Average Hourly Earnings, matching the forecasted growth. NFP increased by 236K jobs, exceeding the forecast but showing a significant decrease from the previous month’s increase. The Unemployment Rate is 3.5%, lower than the forecasted rate by 0.1%.
What does it mean for the Asia Session?
Amid the holidays in Oceania and Europe, the week-long IMF meetings could provide volatility to the major currencies as the meetings are open to the press, and officials usually talk with reporters throughout the day. A formal statement covering policy shifts and meeting objectives is released after the meetings. Both the comments and information can create market volatility.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
Based on the forecasted and previous data provided for the Final Wholesale Inventories m/m, which both show a 0.2% increase, the impact on the USD may be limited unless it differs significantly from expectations.
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 Easter Monday holiday, mainly in Oceania & Europe, should cause the yellow metal to maintain its hover around the $2,000 level.
Next 24 Hours Bias
Mixed
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
No major news event is expected to impact the value of the AUD today amid the Easter Monday holiday. Instead, the upcoming Westpac Consumer Sentiment report (previous 0.0%) and NAB Business Confidence report (previous -4) releases will likely influence the AUD’s price direction. Positive reports could boost the AUD.
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 Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
Without NZD-specific news until Friday, the Kiwi’s direction will likely be influenced by the previously released ANZ Commodity Prices m/m of 1.3% (last 1.4%) due to the Easter Monday holiday.
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 Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The forecasted Current Account balance of 1.43T is significantly higher than the previous data of 0.22T, which could indicate a strengthening of the Japanese economy. A higher Current Account balance may lead to increased demand for JPY, which could positively impact the currency. On the other hand, the forecasted Consumer Confidence index of 31.9 is only slightly higher than the previous data of 31.1, which may not significantly impact the 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 Bullish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
No major news events are expected to impact the EUR today, so traders are looking to upcoming data releases for direction. On Tuesday, the Sentix Investor Confidence data release is expected to show a decline from the previous reading of -11.1 to -12.8. In contrast, the Retail Sales m/m data is forecasted to decline from the last reading of 0.3% to -0.8%.
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?
Given the ongoing bank holiday in the country, it’s probable that the price movement of CHF will be influenced by the recently published Unemployment Rate figures, which have remained steady at 1.9%. This indicates the continued stability and robust performance of the Swiss economy.
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?
Due to a bank holiday in the country today, the direction of the GBP is likely to draw from upcoming data scheduled for release on Tuesday. Based on the BRC Retail Sales Monitor y/y indicating a 5.1% growth rate, compared to the last year’s growth rate of 4.9%, it suggests that the retail sector in the UK is performing well. This could have a positive impact on the GBP.
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?
Due to the absence of significant news events today, the CAD will likely draw price direction from previously released data. Specifically, the Employment Change figure of 34.7K suggests a growing Canadian job market, while the Unemployment Rate of 5.0% indicates a stable labour market. These figures may positively impact the CAD.
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 Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Following OPEC+’s surprise production cut announcement last week, the WTI has been gyrating within a three-dollar band. A resolution of the consolidation will either see an up move towards November 2022 highs around $93 or a down draft to the daily gap support around $76.
Next 24 Hours Bias
Mixed
