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IC Markets Asia Fundamental Forecast | 17 March 2023

What happened in the US session?

The ECB has signalled its intent to continue raising interest rates due to persistent Eurozone inflation underpinned by wage pressures despite concerns over banking mayhem. The SNB’s infusion of 54 billion Swiss Francs into Credit Suisse and support for First Republic Bank suggest a mass banking crisis may be averted.

On the data front, USD unemployment claims of 192K (Forecasted 205K, Previous 212K) indicate a strong job market and potential economic growth.

What does it mean for the Asian Session?

The banking sector liquidity crisis seems largely abated, which could return the focus on the respective central banks’ approach towards tighter monetary policies. Based on solid labour data, the AUD may be an outperformer for the session. The commodity currency was also largely unaffected by the banking sector crisis.

The Dollar Index (DXY)

Key news events today

Prelim UoM Consumer Sentiment

What can we expect from DXY today?

A higher-than-expected Preliminary UoM Consumer Sentiment Index release, with a forecast of 67.0 and a previous figure of 66.9, may positively impact USD and vice versa. Two versions of this data, Preliminary and Revised, are released 14 days apart. The Preliminary release, being earlier, typically has a more significant impact.

Central Bank Notes:

  • The Committee has raised the federal funds rate target range to 4.5-4.75% and plans to continue increasing it to return inflation to 2%
  • The Committee will monitor incoming information and adjust the stance of monetary policy as appropriate to achieve its goals
  • A majority vote from the Committee supported the decision to raise the target range
  • Next meeting is on 23 March 2023

Next 24 Hours Bias

Mixed


Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

The hawkish ECB and combined efforts to prevent a banking crisis from spreading may reduce safe-haven demand for the non-interest-bearing metal.

Next 24 Hours Bias

Bearish


The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

Without significant news, the AUD’s value may be driven higher by the recent positive labour data, with 64.6K jobs added (Forecast 49.7K, Previous -10.9K) and a 3.5% Unemployment Rate (Forecast 3.6%, Previous 3.7%).

Central Bank Notes:

  • Cash rate raised by 25 basis points to 3.60%.
  • Board prioritises returning inflation to target, with a likely need for further monetary policy tightening.
  • Board to closely monitor the global economy, household spending trends, inflation and labour market outlook when assessing interest rate increases.
  • Next meeting on 4 April 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?

NZD’s direction is likely to draw from previously released data, with -0.6% GDP q/q compared to forecasted -0.2% and previous 1.7%, potentially weakening commodity-linked currency.

Central Bank Notes:

  • Monetary Policy Committee increased the OCR from 4.25% to 4.75%
  • Higher interest rates are needed to reduce inflation and support employment sustainably
  • Severe storms in North Island will increase inflation and disrupt production.
  • Next meeting is on 5 April 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?

Japan’s Tertiary Industry Activity m/m is expected to rise by 0.5% (prev. -0.4%). This could positively impact JPY due to its significant contribution to the Japanese GDP (approx. 70%) and suggest overall economic expansion.

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 27 April 2023 

Next 24 Hours Bias

Weak Bullish


The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

Eurozone’s Final CPI y/y is expected to decrease from 8.6% to 8.5%, while the Final Core CPI y/y is expected to remain the same at 5.6%. Should the data set come in lower than expected, the recent hawkish seen in the ECB may be mildly tamed.

Central Bank Notes:

  • ECB raised interest rates by 50 basis points to ensure the 2% inflation target is met
  • Inflation is projected to average 5.3% in 2023, with growth at 1%, and underlying price pressures remain strong
  • The bank will continue to monitor market tensions closely and will be data-dependent in its policy rate decisions
  • Next meeting on 4 May 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?

Swiss economic growth in 2023 is expected to be significantly below average at 1.1%, rising to 1.5% in 2024. The slowdown is also anticipated to affect the Swiss labour market with a lag, with unemployment projected to reach 2.3% in 2024.

Central Bank Notes:

  • Current policy rate is at 1.00%
  • Next meeting on 23 March 2023

Next 24 Hours Bias

Bearish


The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Higher UK Consumer Inflation Expectations, previously at 4.8%, may prompt the Bank of England (BoE) to tighten monetary policy, strengthening the GBP. Conversely, a lower figure could weaken the GBP since this development would reinforce BoE’s intentions to pause rate hikes sooner than expected.

Central Bank Notes:

  • MPC voted to increase Bank Rate by 0.5 percentage points to 4%
  • Near-term data developments are crucial in assessing how quickly external and domestic inflationary pressures will abate
  • MPC’s updated projections show CPI inflation falling back sharply from its current level
  • Next meeting on 23 March 2023 

Next 24 Hours Bias

Mixed


The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

The lower-than-expected figures from second-tier data, namely the Foreign Securities Purchases, IPPI m/m and RMPI m/m, may weaken the CAD.

Central Bank Notes:

  • Bank of Canada maintains its target for the overnight rate at 4.5%
  • Inflation eased in January, but price increases for food and shelter remain high
  • BOC is prepared to increase the policy rate further to return inflation to the 2% target.
  • Next meeting on 12 April 2023

Next 24 Hours Bias

Weak Bearish


Oil

Key news events today

No major news events.

What can we expect from Oil today?

The infusion of liquidity by the US and European central banks and major US banks to stem the liquidity crisis is likely to provide stability to the banking sector and ease concerns over a potential mass banking crisis. This could help reduce uncertainty and volatility in the oil market.

Next 24 Hours Bias

Weak Bullish


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