IC Markets Europe Fundamental Forecast | 14 June 2023
What happened in the Asia session?
The New Zealand economy’s recent data suggests an improving scenario with the current account deficit decreasing to -5.22 billion NZD from the previous -10.07 billion NZD, a better performance than the projected -6.95 billion NZD, potentially boosting the NZD. The Food Price Index rose by 0.3%, lower than the last 0.5% rise, indicating continued inflationary pressure, possibly leading to central bank interventions that may impact the NZD. Thus, these figures present a mixed outlook for the NZD.
What does it mean for the Europe & US Sessions?
If aligned with the latest lower CPI figures, a lower-than-expected PPI data set could see the DXY break below 103.00 and move towards a 20-pip support zone between 102.80-102.60. Alternatively, higher PPI figures would see a bullish retest of recent intra-day highs of around 103.75.
The Dollar Index (DXY)
Key news events today
Core PPI m/m
PPI m/m
What can we expect from DXY today?
The forecasted Core PPI is expected to increase by 0.2%, indicating potential inflationary pressures. If the actual data aligns with or exceeds the forecast, the USD may appreciate as the Federal Reserve tightens monetary policy. However, the previous PPI data showed a decrease of -0.1%, suggesting potential deflationary pressures. If the upcoming data continues this trend, the USD could weaken as accommodative monetary policies are considered.
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 lower US inflation rate could have mixed effects on the US dollar’s value and impact the price of gold as a hedge against inflation.
Next 24 Hours Bias
Mixed
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
Today, no significant news events are affecting the Australian dollar. The market will focus on upcoming data releases, including Employment Change and Unemployment Rate. The forecasted figures for Employment Change indicate an expected increase of 18.6K jobs, while the Unemployment Rate is anticipated to remain at 3.7%.
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 Current Account deficit is forecasted to shrink from -9.46 billion NZD to -6.95 billion NZD, while the Food Price Index m/m was previously reported at 0.5%. A narrower Current Account deficit and a higher FPI could strengthen the NZD by signalling a healthier economy and increased inflationary pressures, possibly prompting a tightening of monetary policy by the Reserve Bank of New Zealand.
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?
Today, no major news event affects the Japanese yen. Its direction will likely draw from upcoming data releases. These include Core Machinery Orders m/m, with a previous figure of -3.9% and a forecasted figure of 3.1%. Another significant release is the Trade Balance, with a last value of -1.02 trillion yen (T) and a predicted value of -0.81T. Additionally, the Tertiary Industry Activity m/m data is significant, with a previous figure of -1.7% and a forecasted figure of 0.5%. Positive surprises in the data could strengthen the JPY, while disappointing figures might weaken 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 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 German Wholesale Price Index (WPI) is expected to decline further by 0.1%, following a 0.4% decrease previously, which could weaken the EUR. The Eurozone Industrial Production, forecasted to recover by 0.8% after a previous 4.1% fall, may bolster the EUR if it outperforms expectations. Lastly, the German 10-year Bond Auction results, previously at an average interest rate of 2.31 with a bid-to-cover ratio of 2.3, will be scrutinised. Lower demand for German bonds could negatively impact the EUR.
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
No major news events.
What can we expect from CHF today?
No major news events expected today would affect the Swiss Franc’s value. Hence, CHF’s price movement is expected to be shaped by the data releases slated for Thursday. The projected m/m Producer Price Index indicates an increase of 0.1%. Moreover, the SECO Economic Forecasts, offering a view into the economic prospects of Switzerland, are also set to be unveiled.
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
Mixed
The Pound (GBP)
Key news events today
GDP m/m
What can we expect from GBP today?
The upcoming UK release for GDP data is forecasted to show a 0.2% month-on-month increase, following a previous decline of -0.3%. The impact on the currency can be significant, with a positive outcome potentially strengthening the GBP if the actual data surpasses the forecast. Conversely, a negative result could weaken the GBP if the data falls short of expectations. Revisions to previous data can also influence the currency’s performance.
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
Weak bullish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
Today, the Canadian Dollar (CAD) will not be significantly influenced by any significant news occurrences. Consequently, the currency’s movement will likely be driven by the data releases scheduled for Thursday. Key data points to keep an eye on include the Housing Starts, which previously reported a figure of 262K and is now projected to be 239K, and the month-on-month Manufacturing Sales, which grew by 0.7% and is forecasted to drop by -0.2%.
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?
China’s decision to cut short-term borrowing costs is expected to stimulate economic recovery and boost oil demand. As one of the world’s largest oil consumers, China’s increased demand could lead to higher global oil prices. However, the American Petroleum Institute (API) reported a rise in US crude and fuel stocks last week, suggesting a build-up of inventory that may offset price increases.
Next 24 Hours Bias
Mixed
