IC Markets Asia Fundamental Forecast | 14 June 2024
What happened in the U.S. session?
Yesterday’s release of the Consumer Price Index (CPI) data for May 2024 showed that the CPI for All Urban Consumers remained unchanged on a seasonally adjusted basis and increased by 3.3% over the last 12 months when not seasonally adjusted. The index for all items excluding food and energy rose by 0.2% in May, also seasonally adjusted, and experienced a year-over-year increase of 3.4% when not adjusted. This reflects a slight cooling compared to the previous month’s year-over-year rise of 3.4%, indicating a mild easing in inflationary pressures.
Moreover, yesterday’s release of the unemployment claims data indicated a rise in initial jobless claims. For the week ending June 8, 2024, the number of initial claims increased to 242K, up by 13K from the previous week’s level of 229K. This figure exceeded the forecasted 225K, signaling a potential cooling in the labor market as more individuals filed for unemployment benefits than expected. The 4-week moving average of claims also rose, reaching 227K—an increase of 4,750 from the prior average. After the news release yesterday, the Dollar Index (DXY) was recorded at 105.25, showing a slight increase of 0.06 points. The data indicated a higher-than-expected number of jobless claims, which typically would exert downward pressure on the USD due to concerns about economic weakness. However, the slight increase in the DXY suggests that other factors or market sentiments might be playing a role in supporting the dollar at the moment.
What does it mean for the Asia Session?
Today’s Asia trading session may see increased caution and volatility due to the recent U.S. economic updates. The higher-than-expected unemployment claims suggest potential weakness in the U.S. labor market, which could dampen global market sentiments. Meanwhile, the stable Dollar Index and the Consumer Price Index data could influence Asian currency markets and investor strategies, as market participants assess implications for U.S. monetary policy and global economic stability.
The Dollar Index (DXY)
Key news events today
Prelim UoM Consumer Sentiment (2:00pm GMT)
What can we expect from DXY today?
The U.S. Dollar Index (DXY) could be influenced today by the release of the Preliminary University of Michigan Consumer Sentiment Index. If the sentiment data indicates that consumers are more confident than expected, the DXY may strengthen as this suggests robust consumer spending and potential economic growth, leading to possible monetary tightening. On the other hand, a weaker than expected consumer sentiment might suggest lower confidence and spending, potentially weakening the dollar as it could prompt the Federal Reserve to maintain or increase monetary support. The impact on the DXY will ultimately depend on whether the sentiment data reflects optimism or pessimism about the U.S. economy
Central Bank Notes:
- The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the seventh meeting in a row.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year.
- The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks. Inflation has eased over the past year but remains elevated and in recent months, there has been modest further progress toward the Committee’s 2% inflation objective.
- Recent indicators suggest that economic activity has continued to expand at a solid pace while job gains have remained strong, and the unemployment rate has remained low.
- In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks and does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.
- In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
- In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
- The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
- Next meeting runs from 30 to 31 July 2024.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
Prelim UoM Consumer Sentiment (2:00pm GMT)
What can we expect from Gold today?
Today’s gold prices could react to the Preliminary UoM Consumer Sentiment data. If the report shows higher consumer confidence, suggesting economic optimism, gold might see a decrease in value as investors turn to riskier assets. Conversely, lower-than-expected sentiment figures could boost gold’s appeal as a safe haven, potentially raising its price. The impact on gold will depend on how the sentiment data is perceived in terms of economic conditions and consumer confidence
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
No major news events
What can we expect from AUD today?
Robust macroeconomic data out of the US caused the Aussie to reverse sharply from 0.6675 and dive under the threshold of 0.6626 by the end of the US session. This currency pair was trading around 0.6529 as Asian markets came online – these are the support and resistance levels for today.
Support: 0.6575
Resistance: 6712
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.35%, marking the eighth pause out of the last nine board meetings.
- The CPI grew by 3.6% over the year to the March quarter, down from 4.1% cent over the year to December. Underlying inflation was higher than headline inflation and declined by less – this was due in large part to services inflation, which remains high and is moderating only gradually.
- The central forecasts, based on the assumption that the cash rate follows market expectations, are for inflation to return to the target range of 2 to 3% in the second half of 2025, and to the midpoint in 2026.
- In the near term, inflation is forecast to be higher because of the recent rise in domestic petrol prices, and higher than expected services price inflation, which is now forecast to decline more slowly over the rest of the year.
- Inflation is, however, expected to decline over 2025 and 2026.
- The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.
- Next meeting is on 18 June 2024.
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?
This currency pair was trading around 0.6148 at the beginning of the Asia session – these are the support and resistance levels for today.
Support: 0.6100
Resistance: 0.6197
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the seventh meeting in a row and agreed that interest rates need to remain at a restrictive level for a sustained period to ensure annual headline CPI inflation returns to the 1 to 3% target range.
- Restrictive monetary policy is contributing to an easing in capacity pressures while headline inflation, core inflation, and most measures of inflation expectations are continuing to decline. However, domestic inflation has fallen more slowly than expected and headline CPI inflation remains above the Committee’s target band.
- Higher dwelling rents, insurance costs, council rates, and other domestic services price inflation have resulted in a slow decline in domestic inflation, posing a risk to inflation expectations.
- GDP declined by 0.1% in the December 2023 quarter with economic growth having now been negative for four of the past five quarters. High interest rates have reduced household spending, as well as residential and business investment, despite very strong population growth. Recent indicators of economic activity have been weak, as expected.
- Next meeting is on 10 July 2024.
Next 24 Hours Bias
Medium Bullish
The Japanese Yen (JPY)
Key news events today
BOJ Policy Rate
Monetary Policy Statement
BOJ Press Conference
What can we expect from JPY today?
Today, the Japanese yen (JPY) could experience significant fluctuations following key announcements from the Bank of Japan (BOJ), including its policy rate decision, the release of the monetary policy statement, and comments during the press conference. An increase in the policy rate may strengthen the yen, while a decrease could weaken it. The tone of the monetary policy statement and any forward-looking statements made during the press conference will also play crucial roles in shaping market expectations and the yen’s trajectory, as investors look for indications of future monetary policy direction
This currency pair was trading around 156.28 as Asian markets came online – these are the support and resistance levels for today.
Support: 156.96
Resistance: 157.67
Central Bank Notes:
- The Bank considers that the policy framework of Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control and the negative interest rate policy to date have fulfilled their roles. With the price stability target of 2%, it will conduct monetary policy as appropriate, guiding the short-term interest rate as a primary policy tool.
- The Bank of Japan decided on the following measures:
- The Bank will encourage the uncollateralized overnight call rate to remain at around 0 to 0.1% while continuing its JGB purchases with broadly the same amount as before.
- In addition, the Bank will discontinue purchases of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) and will also gradually reduce the amount of purchases of CP and corporate bonds and will discontinue the purchases in about one year.
- In a quarterly outlook, the committee revised higher CPI prints for FY 2024 to 2.8% from January’s projections of 2.4%, due to the waning effects of higher import prices and fewer government support measures.
- For 2025, the board expects core inflation to hit 1.9%, slightly higher than its earlier estimates of 1.8%, reflecting a recent rise in oil prices.
- Policymakers cut their 2023 GDP growth forecast to 1.3% from 1.8% and for FY 2024, the bank also slashed its GDP outlook to 0.8% from 1.2%, mainly reflecting lower private consumption.
- Next meeting is on 14 June 2024.
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 mix of unexpected economic data and policy announcements impacted the Euro, triggering a rollercoaster ride in its value. Initially, it climbed from 1.1025 reaching a peak of 1.1110, spurred by positive market sentiment. However, subsequent shifts in monetary policy outlook prompted a retreat to around 1.1060. As the Asian trading session opened, the Euro was observed stabilizing near 1.1065, setting the stage for today’s trading dynamics.
Support: 1.0734
Resistance: 1.0798
Central Bank Notes:
- The Governing Council today decided to lower the three key ECB interest rates by 25 basis points after nine months of holding rates steady.
- Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 4.25%, 4.50% and 3.75% respectively, with effect from 12 June 2024.
- Since September 2023, inflation has fallen by more than 2.5% and the inflation outlook has improved markedly while underlying inflation has also eased, reinforcing the signs that price pressures have weakened, and inflation expectations have declined at all horizons.
- At the same time, despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year – the latest Eurosystem staff projections for both headline and core inflation have been revised up for 2024 and 2025 compared with the March projections.
- Projections now show headline inflation averaging 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026 while economic growth is expected to pick up to 0.9% in 2024, 1.4% in 2025 and 1.6% in 2026.
- The Council also confirmed that it will reduce the Eurosystem’s holdings of securities under the pandemic emergency purchase programme (PEPP) by €7.5 billion per month on average over the second half of the year.
- The Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner and will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim and is not pre-committing to a particular rate path.
- Next meeting is on 18 July 2024.
Next 24 Hours Bias
Medium Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
Following significant policy announcements from the Swiss National Bank and mixed global economic indicators, the Swiss Franc saw volatile trading. The CHF initially strengthened against the dollar, pushing USD/CHF down from 0.9350 to a low of 0.9293. However, it later regained ground, reflecting a rebound in market sentiment and adjustments in monetary policy expectations. As trading commenced in the Asian markets, the currency pair was noted at approximately 0.9350, setting the stage for today’s session dynamics.
Support: 0.8885
Resistance: 0.8989
Central Bank Notes:
- The SNB eased monetary policy by lowering its key policy rate by 25 basis points, going from 1.75% to 1.50% in March.
- For some months now, inflation has been back below 2% and thus in the range the SNB equates with price stability.
- According to the new forecast, inflation is also likely to remain in this range over the next few years.
- The forecast puts average annual inflation at 1.4% for 2024, 1.2% for 2025 and 1.1% for 2026, based on the assumption that the SNB policy rate is 1.5% over the entire forecast horizon.
- Swiss GDP growth was moderate in the fourth quarter of last year and it is likely to remain modest in the coming quarters.
- Overall, Switzerland’s GDP is likely to grow by around 1% this year.
- Next meeting is on 20 June 2024.
Next 24 Hours Bias
Weak Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
Following the overnight release of U.S. unemployment claims data, the British Pound (GBP/USD) displayed some volatility. The GBP/USD pair initially dropped before making a recovery. As the Asian markets came online, the pair was observed trading around a key level. Here are the support and resistance levels for today based on the daily pivot points
Support: 1.2754
Resistance: 1.2808
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7-to-2 to maintain its Official Bank Rate at 5.25% for the sixth consecutive meeting.
- Two members preferred to reduce the Bank Rate by 25 basis points to 5%, an increase of one from the previous meeting.
- Twelve-month CPI inflation fell to 3.2% in March from 3.4% in February and is expected to return to close to the 2% target in the near term, but increase slightly in the second half of this year to around 2.5% owing to the unwinding of energy-related base effects.
- CPI inflation is projected to be 1.9% in two years’ time and 1.6% in three years in the May Report. With respect to indicators of inflation persistence, services consumer price inflation has declined but remains elevated at 6% in March.
- Following modest weakness last year, UK GDP is expected to have risen by 0.4% in 2024 Q1 and to grow by 0.2% in Q2, stronger than expected in the February Report. Despite picking up during the forecast period, demand growth is expected to remain weaker than potential supply growth throughout most of that period.
- The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably and will therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation.
- Next meeting is on 20 June 2024.
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?
Following the release of higher-than-expected U.S. unemployment claims, the Canadian Dollar (USD/CAD) experienced notable volatility. Initially, the pair saw a decline, reflecting a stronger Canadian Dollar against a weakening U.S. Dollar, driven by the unexpected job data. However, it later stabilized and made a partial recovery. As the Asian markets opened, USD/CAD was trading around a pivotal level.
Support: 1.3710
Resistance: 1.3764
Central Bank Notes:
- The Bank of Canada reduced its target for the overnight rate by 25 basis points to 4.75% while continuing its policy of balance sheet normalization.
- Canada’s economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7%, first-quarter GDP growth was slower than forecast in the MPR but consumption growth was solid at about 3%, and business investment and housing activity also increased.
- Inflation remains above the 2% target and shelter price inflation is high but total CPI inflation has declined consistently over the course of this year, and indicators of underlying inflation increasingly point to a sustained easing.
- CPI inflation has eased from 3.4% in December to 2.7% in April while the preferred measures of core inflation have come down from about 3.5% last December to about 2.75% in April and the 3-month rate of core inflation slowed from about 3.5% in December to under 2% in March and April.
- In the labour market, businesses are continuing to hire workers as employment has been growing, but at a slower pace than the working-age population while elevated wage pressures look to be moderating gradually.
- The Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.
- Recent data has increased the council’s confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain.
- Next meeting is on 24 July 2024.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Oil prices have experienced a slight decline, yet they remain on track for a positive week, largely fueled by optimistic expectations surrounding OPEC’s actions. Market sentiments are buoyed by hopes that OPEC might continue to manage supply effectively, which is crucial for stabilizing or potentially increasing oil prices.
Next 24 Hours Bias
Weak Bearish
