IC Markets Asia Fundamental Forecast | 23 March 2022

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What happened in the US session?

Ukrainian President Zelenskyy is scheduled to take part virtually in a NATO summit on Thursday, following his offer to Russia in exchange for a ceasefire through a commitment from his country to not seek NATO membership.

What does it mean for the Asia Session?

The aussie seems more likely to be riding on the US dollar weakness rather than underlying demand. However, losses on the AUD should be limited in the face of rising commodity prices.

The Dollar Index (DXY)

Key news events today

No major news events. 

What can we expect from DXY today?

Fed’s Mester and Daly largely reiterated the hawkish stance of the US central bank, with mention that a 50-bps hike at some meetings in 2022 is possible.

Central Bank Notes:

  • Seven hikes for 2022, with the FFR seen reaching 2.75%-3.0% in 2023
  • Inflation forecasts for 2022 were raised to 4.1% (previous 2.7%) 
  • GDP estimates were lowered to 2.8% from 4.0% 
  • Next meeting on 4 May 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 precious metal did not benefit from the broad US dollar weakness, reflecting an easing of expectations on geopolitical or inflation risks, or both. A higher-than-expected UK CPI (expected 6.0%, previous 5.5%) would bolster the bulls.

Next 24 Hours Bias

Mixed

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

Reserve Bank of Australia Governor Philip Lowe reiterated the dovish central bank view, stating that no reaction is necessary until there is evidence of pervasive price pressure. RBA’s focus is on labour cost signals and the shift in inflation psychology.

Central Bank Notes:

  • Retained dovish outlook at the March meeting
  • Unemployment expected to be below 4% throughout 2023
  • Inflation expected to rise to 3.25% in 2022 and stay at 2.75% through 2023
  • Next meeting on 5 April 2022

Next 24 Hours Bias

Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The Prime Minister of New Zealand will be making an announcement on Covid measures, following a cabinet meeting on Monday to review vaccine mandates, vaccine passports and the traffic light system.

Central Bank Notes:

  • Announced to sell bond holdings from July
  • Upgraded OCR terminal rate to 3.4%, essentially adding another three hikes to their forecasts for the current hiking cycle.
  • Next meeting on 13 April 2022

Next 24 Hours Bias

Mixed

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

Bank of Japan Governor Kuroda noted that the central bank’s main concern is on cost-push inflation, while a rise in consumer inflation seems imminent. An impact on real wages from elevated energy and food prices also seems inevitable.

The BoJ has reiterated multiple times that it will keep its accommodative monetary policy stance even in the face of rising inflation in the short term.

Central Bank Notes:

  • Dismissed debate on an exit from the current easy policy stance
  • Expect inflation to rise to close to 2% in Q2 due to high oil prices
  • Rates in Japan will remain low; higher domestic price pressures in the months ahead.
  • Next meeting on 27 April 2022

Next 24 Hours Bias

Weak Bearish