IC Markets Asia Fundamental Forecast | 18 May 2022

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What happened in the US session?

The month-on-month US Retail Sales came in at 0.9% in April, lower than the 1.0% expected. The March result nearly tripled to 1.4% from 0.5% upon revision.

What does it mean for the Asia Session?

The antipodeans are expected to gain against the greenback following the more hawkish-than-expected turn by the RBA. Further gains are likely to be limited by the anticipated weakness in gold and the hawkish Fed.

The Dollar Index (DXY)

Key news events today

No major news events. 

What can we expect from DXY today?

Fed chair Powell stated that there is broad support for the FOMC to have 50bps hikes on the table at the next two meetings. The central bank will not hesitate to raise rates until inflation comes down.

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

Strong Bullish

Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

The assertion by the US central bank chief on the interest rate hike path to quell inflation is likely to weigh on the non-interest-bearing precious metal.

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

Wage Price Index q/q, 0030 GMT

What can we expect from AUD today?

Australian central bank policymakers considered 40bps for the size of the rate increase, but most preferred 25bps. Additionally, according to the latest RBA meeting minutes, the members agreed that further hikes would most likely be required to ensure inflation returns to the target.

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

Weak Bullish

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 still expected 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

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The latest Japanese GDP figures saw negative growth but are still better than expected. The country’s Economic Minster expects the economy to pick up, though uncertainty remains due to the war in eastern Europe and supply-chain issues.

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