IC Markets Asia Fundamental Forecast | 17 May 2022

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What happened in the US session?

Bank of England Governor Bailey stated that 80% of the inflation in the country is due to energy and tradable goods, raising concerns that pay growth would lead to a sustained upward spiral in prices and dismissing the possibility of quantitative tightening under challenging conditions.

What does it mean for the Asia Session?

The highlight of the session is on the RBA minutes. A tone towards policy normalisation would further boost an Aussie recovery against the greenback.

The Dollar Index (DXY)

Key news events today

Core Retail Sales m/m

Retail Sales m/m, 1230 GMT

Fed Chair Powell Speaks, 1800 GMT

What can we expect from DXY today?

ECB’s Williams stated that the inflation is too high, essentially reaffirming the central banks’ path toward an aggressive rate hike path.

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?

A lower-than-expected UK year-on-year CPI (expected 9.1%, previous 7.0%), to be released on 18 May, would set toppish inflation expectations and additional demand for the precious metal amid the prolonged war in eastern Europe.

Next 24 Hours Bias

Mixed-to-Weak Bearish

The Australian Dollar (AUD)

Key news events today

Monetary Policy Meeting Minutes, 0130 GMT

What can we expect from AUD today?

The minutes are likely to echo a ‘less dovish, more hawkish’ stance of the central bank’s recent higher-than-expected hike of 25bps.

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 Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The Kiwi is likely to follow the directional cues from the Aussie following the release of the RBA’s Monetary Policy Meeting Minutes.

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 Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The outcome of the upcoming Japanese preliminary GDP figures is likely to be overshadowed by the BoJ’s ultra-accommodative monetary policy stance.

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