IC Markets Asia Fundamental Forecast | 29 June 2023
What happened in the US session?
On Wednesday, at a conference at the Portuguese resort of Sintra, several prominent central bankers stated that robust economies are causing inflation to remain elevated, necessitating further monetary tightening.
What does it mean for the Asia Session?
The DXY looks set to seek a retest of the recent intra-day highs at 102.80. Successful bulls would look to take 103.00 before 103.30. Maintenance of the support at 102.50 would reinforce the upward scenario. Stronger than expected US Final GDP q/q and Unemployment Claims could drive the expected short-term bullishness in the USD.
The Dollar Index (DXY)
Key news events today
Final GDP q/q
Unemployment Claims
What can we expect from DXY today?
The upcoming US data releases include the Final GDP q/q, with a forecast of 1.4% growth compared to the previous reading of 1.3%. If the actual data meets or exceeds the forecast, it could lead to a stronger USD as investors view it as a positive signal. Additionally, the Unemployment Claims data is expected to remain unchanged at 264K. This indicates stability in the job market, which could have a neutral impact on the USD.
Central Bank Notes:
- The federal funds rate target range will be 5 to 5-1/4 per cent.
- The Committee is strongly committed to returning inflation to its 2% 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 is on 26 July 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 hawkish speeches from top central bankers pose implications for gold, potentially declining value due to higher interest rates and stronger currencies. However, continued high inflation could drive investors towards gold, increasing its prices. The impact on gold will depend on how effectively these measures control inflation in the coming months.
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?
The previous Australian Retail Sales month-on-month data showed no growth at 0.0%, while the forecasted data for the upcoming release predicts a slight increase of 0.1%. If the actual data exceeds the forecasted figure, it could positively impact the Australian dollar, boosting investor confidence. However, if the data falls below the predicted figure, it may weaken the AUD and decrease investor confidence.
Central Bank Notes:
- The RBA increased the cash rate target by 25 basis points to 4.10%.
- Inflation in Australia has passed its peak but remains high at 7% and needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting on 4 July 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?
The ANZ Business Confidence report, reflecting the sentiment of around 1,500 New Zealand businesses, was last reported at -31.1. An improvement from this figure could boost the NZD by indicating better economic conditions, while a further decline could suggest a worsening business environment, potentially lowering the value of the NZD.
Central Bank Notes:
- The Monetary Policy Committee has raised the OCR from 5.25% to 5.50%
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the target range while supporting maximum sustainable employment
- The Committee voted by a majority of five to two to increase the OCR by 25 basis points to 5.50%
- Interest rates must remain restrictive to ensure inflation returns to the target range while supporting maximum sustainable employment
- Next meeting is on 12 July 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?
The upcoming data releases from Japan include the Retail Sales y/y figure, with a forecasted value of 5.2% (previous: 5.1%), and the Consumer Confidence Index, with a predicted value of 36.2 (prior: 36.0). If the actual Retail Sales y/y figure exceeds the forecasted 5.2%, it may strengthen the JPY, while a lower-than-expected figure could weaken the currency. Similarly, a higher-than-forecasted Consumer Confidence index could support the JPY, whereas a lower index may hurt the currency.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2%
- 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%.
- 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 27 July 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 release of the German Preliminary Consumer Price Index month-on-month data is forecasted to show a 0.2% increase. The previous data indicated a decrease of -0.1. If the actual data meets or exceeds the predicted growth, it may positively impact the EUR and vice versa.
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 27 July 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?
Today, there is no major news event impacting the Swiss Franc. As a result, the direction of CHF prices is likely to be influenced by upcoming data releases. The retail sales year-on-year data is expected to show a forecasted decrease of -2.5% compared to the previous year’s decline of -3.7%. The KOF Economic Barometer is also predicted to be 89.1, slightly lower than the last reading of 90.2. These figures suggest a potential negative trend in retail sales and a possible slowdown in economic growth, which could negatively impact the value of the Swiss Franc.
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% this year.
- Next meeting on 21 September 2023.
Next 24 Hours Bias
Bearish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The upcoming data releases for GBP include the M4 Money Supply m/m (forecasted data suggests a 0.2% increase, indicating potential economic expansion), Mortgage Approvals (previous data showed 49,000 approvals, with a predicted growth to 50,000 approvals, reflecting a thriving housing market), and Net Lending to Individuals m/m (previous data showed positive lending of 0.2 billion GBP, but the forecasted data indicates negative lending of -0.6 billion GBP, implying reduced consumer borrowing and potential impact on consumer spending).
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted to increase Bank Rate by 0.5 percentage points to 5%.
- Two members preferred to maintain Bank Rate at 4.5%.
- CPI inflation is expected to fall significantly due to developments in energy prices.
- The updated projections show that CPI inflation is expected to decline slightly above 1% at the two and three-year horizons, below the 2% target.
- Next meeting on 3 August 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?
Today, there is no major news event affecting the CAD. Therefore, its direction is expected to depend on upcoming data releases. The focus is on the GDP m/m data, with a forecasted increase of 0.2%. If the actual GDP m/m matches or exceeds this forecast, it could strengthen the CAD. Conversely, a result below the forecast may weaken the CAD.
Central Bank Notes:
- The Bank of Canada increased its target for the overnight rate to 4.75%.
- Canada’s economy was more substantial than expected in the first quarter of 2023, with GDP growth of 3.1%.
- The Bank expects CPI inflation to ease to around 3% in the summer, but concerns have increased about inflation staying above the 2% target.
- Next meeting on 12 July 2023
Next 24 Hours Bias
Mixed
Oil
Key news events today
No major news events.
What can we expect from Oil today?
The latest Crude Oil Inventories data shows a significant -9.6M drop, surpassing the forecasted -1.4M and previous -3.8M decreases. This could drive up oil prices due to heightened demand or reduced supply, leading to potential inflation, increased operational costs for oil-dependent industries, and an uptick in energy stocks.
Next 24 Hours Bias
Bullish
