IC Markets Europe Fundamental Forecast | 5 June 2023
What happened in the Asia session?
The AUD faces potential volatility due to mixed economic data. The MI Inflation Gauge showed a surprising increase to 0.9% against a forecasted 0.2%, potentially pressuring the Reserve Bank of Australia towards rate hikes. The ANZ Job Advertisements rose slightly to 0.1%, indicating a slow job market recovery. However, the Company’s Operating Profits fell short of expectations, at 0.5% versus a forecasted 2.1%, suggesting weaker business conditions.
The Caixin Services PMI for the closely linked CNY came in at 57.1, exceeding the forecast of 55.2, indicating China’s service sector is expanding faster than anticipated, which could positively impact the AUD.
What does it mean for the Europe & US Sessions?
The DXY will likely be in a consolidative mood between 103.50 and 104.40 before the ISM Services PMI data release. In parallel, USD/CHF will likely range from 0.9040 to 0.9140.
The Dollar Index (DXY)
Key news events today
ISM Services PMI
What can we expect from DXY today?
The upcoming release of the ISM Services PMI data, with a forecasted value of 52.6, is expected to have a moderate impact on the currency market. If the actual data matches or exceeds the forecast, indicating expansion in the sector, it may boost investor confidence and strengthen the currency. The previous PMI reading was 51.9, suggesting a slight improvement.
Central Bank Notes:
- The committee raised the target range for the federal funds rate to 5 to 5-1/4 per cent. The U.S. banking system is sound and resilient.
- Tighter credit conditions for households and businesses may weigh on economic activity, hiring, and inflation.
- The committee is committed to returning inflation to its 2% objective
- The committee will adjust monetary policy as appropriate if risks emerge that could impede the attainment of goals
- Next meeting is on 14 June 2023
Next 24 Hours Bias
Mixed
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The recent release of employment data has shown mixed effects on the USD. These mixed indicators can indirectly impact the price of gold, as investors may interpret the data differently and seek gold as a safe-haven asset during times of uncertainty.
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 Australian data releases include the MI Inflation Gauge m/m and the ANZ Job Advertisements m/m. The previous figures showed a 0.2% rise in inflation and a 0.3% decrease in job ads. Higher inflation could strengthen the AUD due to potential rate hike expectations. Similarly, increasing job ads may boost the AUD, reflecting improved business confidence. Meanwhile, the upcoming Company Operating Profits q/q data release, which previously increased by 10.6%, is forecasted to rise by a smaller margin of 2.1%. If the actual figure exceeds expectations, it may indicate a robust corporate sector, potentially boosting the AUD.
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
Weak bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
Due to a bank holiday in the country today, upcoming data will likely influence the NZD price direction. The ANZ Commodity Prices have decreased by 1.7% month-on-month, indicating reduced demand for New Zealand’s exported commodities. Additionally, the GDT Price Index has dropped by 0.9%, reflecting lower prices for dairy products sold at the Global Dairy Trade auction. These figures suggest potential downward pressure on 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
Weak bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
No vital news directly affects the Japanese yen today. Traders are expected to focus on forthcoming data: the Average Cash Earnings y/y forecast is at 1.9%, up from the previous 1.3%, which could boost the yen if met or exceeded. Conversely, the Household Spending y/y data, forecasted at -2.2% from the prior -1.9%, may weigh on the currency if the downward trend continues. The 30-year Bond Auction’s outcome, previously at 1.25|3.5, will be crucial in gauging investor confidence.
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 15 June 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 upcoming data releases for the EUR currency include the Final Services PMI (forecasted and previous value: 55.9), Sentix Investor Confidence (predicted value: -15.2, last value: -13.1), and PPI m/m (expected value: -3.0%, previous value: -1.6%). Additionally, there will be a speech by ECB President Lagarde. These data and the address could impact the EUR currency, with lower investor confidence and a deeper contraction in producer prices potentially weakening the currency. Traders will closely monitor the statements by President Lagarde for any indications of monetary policy changes or hints about future interest rate decisions.
Central Bank Notes:
- The ECB has decided to raise the three key interest rates by 25 basis points as the inflation outlook continues to be too high for too long.
- The ECB will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
- Renewed financial market tensions and Russia’s war against Ukraine remain significant economic downside risks.
- The continued resilience of the labour market could lead to higher growth than anticipated.
- Next meeting on 15 June 2023
Next 24 Hours Bias
Mixed
The Swiss Franc (CHF)
Key news events today
CPI m/m
What can we expect from CHF today?
The upcoming Swiss CPI m/m data is anticipated at 0.3%, while the previous CPI m/m figure was 0.0%. If the actual CPI exceeds the forecasted figure, it could strengthen the CHF, indicating rising inflation and potential tightening of monetary policy. Conversely, a lower-than-expected CPI could weaken the CHF, reflecting weaker inflationary pressures and potential economic slowdown concerns.
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
Weak bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The upcoming release of the Final Services PMI data for GBP, with a forecasted and previous value of 55.1, is expected to impact the currency moderately. If the data meets or exceeds expectations, it could boost confidence in the GBP, while falling short of expectations might raise concerns and lead to a decline in demand for the currency.
Central Bank Notes:
- The MPC of the BoE voted 7-2 to increase Bank Rate by 0.25 percentage points to 4.5%.
- 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.
- CPI increased unexpectedly but is expected to fall sharply over the rest of the year due to lower energy prices.
- Next meeting on 22 June 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?
The Canadian Dollar today is expected to be influenced by Tuesday’s data releases. These include a forecasted growth of 0.2% for Building Permits m/m, a decrease from 11.3%, and the Ivey PMI, expected to be 57.2, slightly above its previous 56.8. These figures could sway the CAD’s value, with higher-than-expected results potentially boosting the currency and lower results leading to its weakening.
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 OPEC+ group of oil-producing countries, including Saudi Arabia, Iraq, and Russia, has agreed to extend output cuts by 1.4 million barrels per day into the following year. This decision aims to stabilise oil prices, balance supply and demand, and prevent a potential oversupply.
Next 24 Hours Bias
Weak bullish
