IC Markets Europe Fundamental Forecast | 9 June 2023
What happened in the Asia session?
The Japanese Yen’s M2 Money Stock y/y matched the forecast at 2.7%, a modest rise from 2.6%, suggesting a slight potential depreciation due to possible inflation.
The CPI in China showed a value of 0.2% y/y, matching the forecasted figure and indicating stable inflation. However, the Producer Price Index (PPI) in China reported an actual value of -4.6% y/y, worse than the forecasted -4.3% and reflecting deflationary pressures. The larger-than-expected decline in PPI could affect the AUD due to reduced demand for Australian exports.
What does it mean for the Europe & US Sessions?
Robust labour data from the Canadian front could drive the USD/CAD pair to break below the round figure support at 1.3300 and favour a further drop to weekly lows of around 1.3230. Alternatively, the pair could retest recent highs at 1.3360.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
Today, no major news events will be affecting the USD. Its direction is expected to rely on previously released data. The higher-than-expected Unemployment Claims could influence the Fed to pause its rate hike trajectory as these figures suggest a potential increase in jobless claims.
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?
The rise in the US Unemployment Claims and potential monetary policy adjustments can drive up the price of gold, as it is viewed as a hedge against inflation and currency fluctuations.
Next 24 Hours Bias
Weak bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
Today, there is no significant news impacting the Australian dollar. The direction of the AUD’s price will likely depend on previously released Trade Balance data. The figures exceeded expectations, indicating a stronger trade surplus.
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?
The New Zealand Dollar may experience a bearish trend due to the recently released Manufacturing Sales data, which showed a decrease of -2.8% quarter on quarter, a sharper decline than the previous -1.0%. This suggests a potential economic slowdown which could impact NZD’s strength.
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?
If Japan’s M2 Money Stock y/y data exceeds or matches the forecast of 2.7%, it could positively or neutralise the JPY. However, if the data falls below the previous reading of 2.5%, it may hurt the currency.
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 release of Italian Industrial Production m/m data is expected to show a growth of 0.2%. If the actual data matches the forecast, it could boost confidence in the Eurozone economy. However, the previous data recorded a decline of -0.6%, which might temper optimism.
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?
The CHF lacks major news events today, likely resulting in limited price movements. However, traders are likely to pay attention to the recent statements made by SNB Chairman Thomas Jordan. He emphasises the need for rate hikes to control inflation, which could strengthen 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?
Today, there is no major news event impacting the GBP. Its price direction is expected to be influenced by the previously released RICS House Price Balance, with an actual value of -30%. The data shows an improvement compared to the forecasted (-39%) and previous (-39%) values. This suggests a better housing market condition, which could positively impact the GBP’s price.
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?
The forecasted figures indicate an expected increase of 21.2K jobs in Employment Change and a decrease in the Unemployment Rate from 5.1% to 5.0%. If the actual data meets or exceeds these forecasts, it will likely positively impact the CAD, signalling a solid labour market and a healthier economy. However, if the data falls short, it could weaken the CAD and raise concerns about the Canadian economy’s performance.
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?
The White House has denied reports of a potential oil deal with Iran, leading to uncertainty in the oil market. This has caused volatility in oil prices, as initial expectations of increased Iranian oil exports have been disrupted—geopolitical tensions surrounding Iran’s nuclear program should continue to impact oil prices.
Next 24 Hours Bias
Mixed
