IC Markets Europe Fundamental Forecast | 12 June 2023
What happened in the Asia session?
The Japanese PPI reported a lower-than-expected 5.1% increase y/y, compared to the forecast of 5.6% and the previous 5.9%. The Preliminary Machine Tool Orders also recorded a more significant decline of -22.2% y/y compared to the last -14.4%. These data indicate decreasing inflationary pressures and a slowdown in the manufacturing sector, which could negatively impact the Japanese Yen.
What does it mean for the Europe & US Sessions?
Amid a data-light session for the rest of the trading day, hawkish comments from MPC Member Mann could boost the Cable to retest the psychological resistance at 1.2600. Otherwise, a balanced speech could see the GBP/USD drift lower to the recent intra-day low of around 1.2530.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The previous 10-y Bond Auction showed an interest rate of 3.45% and a bid-to-cover ratio of 2.4, with higher figures in this auction likely boosting the USD. Meanwhile, a shift in the Federal Budget Balance from a surplus of 176.2B to a projected deficit of -205.0B could pressure the USD downwards.
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 upcoming data releases for the US CPI indicate a forecasted increase in CPI m/m from 0.2% to 0.4% and a rise in CPI y/y from 4.1% to 4.9%. The Core CPI m/m is expected to remain at 0.4%. These figures suggest a moderate potential impact on gold prices. If the data confirms or exceeds the forecasted values, indicating persistent inflationary pressures, it could drive up demand for gold as an inflation hedge. Conversely, lower-than-expected CPI figures could reduce the appeal 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?
A -7.9% drop in the Westpac Consumer Sentiment index suggests potential downward pressure on the AUD if the pessimism continues. Furthermore, the neutral NAB Business Confidence index of 0 could swing the AUD’s value depending on whether it rises or falls in the upcoming release. These economic indicators will likely impact the AUD despite the holiday today.
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?
Today, the New Zealand dollar had no significant news to affect its value, making upcoming data releases crucial for its price direction. The recent Visitor Arrivals m/m data showed a 2.9% decrease, which could lower NZD demand and potentially influence its value.
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?
The upcoming Japanese data includes the Producer Price Index y/y, expected to decrease to 5.6% from 5.8%, and the Preliminary Machine Tool Orders y/y, which previously recorded -14.4%. The lower PPI might weaken the JPY while increasing the Machine Tool Orders from the previous figure could strengthen it.
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?
No major news events today affect the currency market, particularly the EUR. Price direction will likely depend on upcoming data releases, specifically the German ZEW Economic Sentiment. The previous release was -13.2, with a forecasted value of -10.7 for the current release. Positive sentiment strengthens the Euro; negative sentiment weakens it.
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
Weak bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
Today, the CHF is experiencing a lack of significant news developments, potentially leading to limited fluctuations in its price. Nevertheless, traders are expected to focus on SNB Chairman Thomas Jordan’s recent remarks, highlighting the importance of raising interest rates to manage inflation, which could bolster the Swiss franc.
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?
Bank of England’s MPC member, Jonathan Mann, is set to speak at a Signum Global Advisors webinar. This event is critical as his remarks on monetary policy, including interest rates and quantitative easing, can sway the GBP. A hawkish tone indicating potential rate hikes or reduced asset purchases could bolster the GBP. Conversely, a dovish tone may weaken the GBP, suggesting lower rates or increased easing.
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?
Today, no major news events are affecting the CAD. As for previously released data, the Employment Change shows a decrease of -17.3K jobs, negatively impacting the Canadian dollar. Additionally, the Unemployment Rate has increased from 5.0% to 5.2%, suggesting potential weakness in the labour market. These figures imply that the CAD may face downward pressure due to decreased employment and a higher unemployment rate.
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
Weak bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Chinese data has raised doubts about the expected growth in oil demand following Saudi Arabia’s decision to cut output. The implications for oil-producing nations are significant, as reduced demand growth from the world’s largest oil importer could result in decreased export revenues and economic repercussions.
Next 24 Hours Bias
Weak bearish
