IC Markets Europe Fundamental Forecast | 8 June 2023
What happened in the Asia session?
Japanese Yen saw multiple positive data outcomes: Bank Lending y/y surpassed forecasts at 3.4% (forecast: 3.1%), Current Account stood at a healthy 1.90T versus the expected 1.39T, and Final GDP q/q showed better growth at 0.7% against the predicted 0.5%. However, Economy Watchers Sentiment slightly missed expectations at 55.0 compared to the expected 55.1.
The Australian Dollar was under pressure as the Trade Balance came in at 11.16B, much lower than the forecasted 13.65B.
What does it mean for the Europe & US Sessions?
A stronger-than-expected US Unemployment Claims could influence the Fed to favour maintaining the Fed Funds rate “higher and longer”. This development would see the DXY rise to retest recent highs of around 104.60. On the flip side, a drop to 103.30 would be on the cards.
The Dollar Index (DXY)
Key news events today
Unemployment Claims
What can we expect from DXY today?
The upcoming data release for US Unemployment Claims is expected to show a slight increase from the previous period, with a forecast of 236,000 claims compared to the last figure of 232,000. If the data confirms this forecast, it could weaken the US dollar.
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
Weak bearish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
Amid a global trend of central banks raising rates to curb inflation, with the RBA taking action before the latest BoC hike, the non-interest-bearing gold could weaken further.
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?
If the Trade Balance exceeds the forecasted figure of 13.65B, it could strengthen the AUD, indicating a robust economy and increased demand for the currency. Conversely, if the data falls below 13.65B, it may exert downward pressure on the AUD, suggesting weaker export performance and higher reliance on imports.
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
Weak bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
A further contraction in the forthcoming New Zealand Manufacturing Sales q/q data, previously at -0.4%, may weaken the NZD due to a potential economic slowdown and less foreign investment. However, a rebound could strengthen the NZD by boosting investor confidence and potentially increasing foreign investment.
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 in Japan are expected to have a mixed impact on the JPY. Bank Lending y/y is forecasted to decrease slightly from 3.2% to 3.1%. The Current Account is expected to improve significantly from 1.01T to 1.39T. The Final GDP Price Index y/y is predicted to remain unchanged at 2.0%. The Final GDP q/q is expected to increase slightly from 0.4% to 0.5%. The Economy Watchers Sentiment is projected to rise from 54.6 to 55.1. Overall, the impact on the JPY may be limited but slightly positive due to the improvements in the Current Account and GDP growth, while the decrease in Bank Lending may have a minor negative influence.
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 Euro include French Final Private Payrolls q/q with a forecast and previous growth rate of 0.2%, Final Employment Change q/q with a forecast and previous growth rate of 0.6%, and Revised GDP q/q with a forecast of 0.0% and a prior growth rate of 0.1%. If the actual data matches the estimates, it suggests stability in the French job market and consistent employment growth in the Eurozone. However, any deviations from the expected figures could impact market sentiment. Additionally, a potential slowdown in economic expansion indicated by the Revised GDP q/q could negatively impact the Euro.
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?
The Swiss National Bank Chairman, Thomas Jordan, is set to discuss the economic outlook at the Swiss Economic Forum. The potential impact on the Swiss Franc will hinge on his assessment of the Swiss economy and the direction of the SNB’s monetary policy. An optimistic view or likely policy tightening could bolster the CHF, while concerns about the economy or signals of monetary easing may lead to its depreciation.
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
No major news events.
What can we expect from GBP today?
A negative RICS House Price Balance figure, expected to remain at -39%, reflects a decline in house prices and a bearish sentiment in the housing market. If the upcoming data release confirms the forecasted figure, it may weigh on the GBP currency, potentially leading to increased market volatility. This could raise concerns about the health of the housing market and the broader economy, resulting in downward pressure on the GBP against other major currencies.
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 bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
Today, no major news event affects the CAD. However, the surprise hike in the Overnight Rate, currently at 4.75% (actual), with a forecasted and previous rate of 4.50%, should strengthen the Canadian dollar until Friday’s data releases.
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 bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
US crude stocks unexpectedly declined to -0.5m (forecast 1.2m, last 4.5m), indicating a potential rebalancing of supply and demand. Concurrently, fuel inventories in the country experienced a larger-than-anticipated buildup. Additionally, China’s exports contracted faster than expected in May, raising concerns about weaker demand and potential economic challenges.
Next 24 Hours Bias
Mixed
