IC Markets Asia Fundamental Forecast | 16 May 2022

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What happened in the US session?

The US Prelim UoM Consumer Sentiment fell much more than expected to 59.1 (expected 64.1, previous 65.2). 

What does it mean for the Asia Session?

China’s year-on-year Retail Sales (expected -6.5%, previous -3.5%) will take centre stage amid its attempt to cull the virus with the zero-covid strategy. The antipodeans will continue to suffer. 

The Dollar Index (DXY)

Key news events today

No major news events.

What can we expect from DXY today?

The larger-than-expected drop in Consumer Sentiment, a leading indicator of consumer spending which accounts for a majority of overall economic activity, is likely to be adversely reflected in Tuesday’s Retail Sales (expected 1.1%, previous 0.5%).

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?

Rising global interest rates are likely to overshadow the toppish inflation rates and war in eastern Europe, continuing to add bearish pressure on the 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?

Ahead of tomorrow’s RBA Monetary Policy Meeting Minutes report, which is expected to see a ‘less dovish, more hawkish’ reiteration of the central bank’s recent hike, China’s year-on-year retail sales (expected -6.2%, previous -3.5%) may drag the Aussie.

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

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Amid a lack of first-tier data releases and currency-specific news flow, the Kiwi is likely to take the lead from the Aussie, which has a relatively heavy-data week.

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?

Bank of Japan Governor Kuroda stated that Japan has yet to reach its inflation target of 2%. Even if the target is reached in the short term, it is not likely to be sustainable as the price increase would be largely energy-driven, thereby justifying the continuation of BoJ’s ultra-accommodative monetary policy.

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

Weak Bearish