IC Markets Asia Fundamental Forecast | 13 May 2022

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What happened in the US session?

The US month-on-month PPI came in as expected at 0.5% (previous 1.4%), driving the dollar to a 20-year high.

What does it mean for the Asia Session?

The Japanese yen is still expected to outshine safe-haven counterparts, the US dollar and the Swiss franc.

Prospects of a recovery for the antipodeans remain bleak amid the Covid-19 situation in China, the largest trading partner for Australia and New Zealand.

The Dollar Index (DXY)

Key news events today

No major news events.

What can we expect from DXY today?

A lower-than-expected US Prelim UoM Consumer Sentiment (expected 64.1, previous 65.2) may serve as a prelude to a decline in Retail Sales. 70% of US economic activity is dependent on consumer spending.

Central Bank Notes:

  • Confirmed that the committee expects further 50bps hikes to be appropriate; 75bps hikes off the table
  • Balance sheet reduction push up to $60b (treasuries) and $35b (MBS) over a three-month timeframe
  • Next meeting on 15 June 2022

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

The anticipated rate hikes by global central banks in 2022 are likely to keep the lid on the non-interest-bearing precious metal. 

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?

An upcoming speech by RBA Deputy Governor Bullock at 0200 GMT may reveal the central bank’s outlook on rates following the surprise 25bps in the latest meeting.

Central Bank Notes:

  • Stated that further increases in the cash rate will be required to bring inflation back in line with the target
  • Announced passive quantitative tightening by stopping the reinvestment of maturing bonds.  
  • Next meeting on 7 June 2022

Next 24 Hours Bias

Mixed-to-Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The New Zealand central bank stated that inflation expectations remain at 1-3% in the long term. However, inflation expectation for the 1-year inflation is at a 32-year high.

Central Bank Notes:

  • Stressed that inflation is a concern and will ensure that higher price pressures don’t become embedded in longer-term inflation expectations
  • Stated that more hikes are needed but didn’t increase their neutral rate expectations 
  • Next meeting on 25 May 2022

Next 24 Hours Bias

Mixed-to-Weak Bearish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The Summary of Opinion from the Bank of Japan for April stated that the weak JPY is positive for the economy amid a significant output gap and relatively low inflation rate environment.

Central Bank Notes:

  • Kept all policy settings unchanged at their April meeting
  • Reiterated that rates will stay low for the foreseeable future and won’t hesitate to add stimulus if the economy needs it
  • Next meeting on 16 June 2022

Next 24 Hours Bias

Mixed