IC Markets Asia Fundamental Forecast | 19 May 2022

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What happened in the US session?

The Canadian CPI data set recorded higher than expected inflation numbers. In an earlier release, the UK CPI rose but came just below expectations to 9.0% (expected 9.1%, previous 7.0%).

What does it mean for the Asia Session?

The key focus would be the Australian labour data set, namely the Employment Change (expected 30.0k, previous 17.9k) and Unemployment Rate (expected 3.9%, previous 4.0%)

The Dollar Index (DXY)

Key news events today

No major news events. 

What can we expect from DXY today?

The latest Fed-speak reaffirms Fed chair Powell’s speech that broad support is present to have 50bps hikes on the table at the next two meetings to deal with elevated inflation until it subsides.

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?

Despite toppish inflation rates seen in the US and the UK, the latest CPI increases in Canada, an oil-rich country that has avoided most energy-led inflation, reaffirms the central banks’ approach to acting aggressively to increase rate, an action detrimental to the non-interest-bearing yellow metal.

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

Employment Change

Unemployment Rate

What can we expect from AUD today?

The lower-than-expected Australian quarter-on-quarter Wage Price Index at 0.7% (expected 0.8%, previous 0.7%) may lead to a less aggressive RBA that recently said that further rate increases remain to curb inflation.

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 laggard to the Aussie is likely to consolidate further as the risk-off sentiment builds. 

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?

Amid a lack of first-tier data releases and currency-specific news flow, the Japanese yen is likely to get a boost from its safe-haven status amid the developing risk-off sentiment.

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-to-Weak Bullish