IC Markets Asia Fundamental Forecast | 23 October 2023
What happened in the US session?
Following in the same footsteps as Federal Reserve Chairman Jerome Powell and his fellow FOMC members, Federal Reserve Bank of Philadelphia President Patrick Harker repeated his view that he favours holding interest rates once more while keeping a close eye on incoming economic data during this speech last Friday. The dollar index (DXY) closed at 106.16 to mark the largest weekly loss since mid-July.
What does it mean for the Asia Session?
The US dollar was one of the stronger performing currencies this morning as Asia came online, especially against the Swiss franc and the Euro. The DXY failed to break under the 106.00-threshold last week and could once again remain above this level as the new trading week gets underway.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The US dollar was one of the stronger performing currencies this morning as Asia came online, especially against the Swiss franc and the Euro. The DXY failed to break under the 106.00-threshold last week and could once again remain above this level as the new trading week gets underway.
Central Bank Notes:
- The Federal Funds Rate target range remained unchanged at 5.25% to 5.50%.
- The Committee is strongly committed to returning inflation to its 2.0% target.
- The Committee will adjust monetary policy if risks emerge that could hinder achieving its goals.
- Various factors will be considered, including labour market conditions, inflation pressures, inflation expectations, and international and financial developments.
- Next meeting runs from 31 October to 1 November 2023.
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
After briefly touching the key $2,000/oz threshold last Friday, spot gold prices are tumbling sharply as markets kicked off the new trading week. With the ongoing geo-political risks in the Middle East experiencing relative calm over the weekend, tensions appear to be fading and is diminishing the demand for safe-haven assets such as gold for now. However, any further escalation in this region would likely trigger the next round of demand for such assets.
Next 24 Hours Bias
Medium Bearish
The Australian Dollar (AUD)
Key news events today
Flash Composite PMI (10:00 pm GMT)
What can we expect from AUD today?
The Composite PMI increased to 51.5 in September, rising from 48.0 in the previous month. It marked the highest reading since May as Australia’s private sector returns to expansion – the growth in the private sector was driven primarily by new orders. Meanwhile, manufacturing new orders remained under pressure from deteriorating economic conditions and higher interest rates. Another month of expansion for the flash PMI reading for October could potentially provide some lift for the Aussie.
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.10% for the fourth consecutive meeting.
- Inflation in Australia has passed its peak but is still too high and will remain so for some time yet.
- Some further tightening of monetary policy may be necessary.
- Next meeting is on 7 November 2023.
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?
After two consecutive weeks of strong declines, the Kiwi has found support above the key 0.5800-threshold for now. Should demand for the US dollar remain elevated, we could see the Kiwi attempt to break under this level for the first time since November of last year.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee agreed that the OCR needs to stay at a restrictive level to ensure that annual consumer price inflation returns to the 1 to 3% target range and to support maximum sustainable employment.
- While supply constraints in the economy continue to ease, inflation remains too high.
- Spending needs to remain subdued to better match the economy’s ability to supply goods and services, so that consumer price inflation returns to its target range.
- Next meeting is on 29 November 2023.
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?
With a couple of suspected intervention attempts by the Bank of Japan (BoJ) over the past two weeks, USD/JPY has failed to break above the key 150-threshold. This currency pair is rising towards this level once more, making another attempt to convincingly break above this threshold.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2.0%.
- The Bank of Japan decided on the following measures:
- Yield curve control: Negative interest rate of -0.1% on policy-rate balances and purchase of Japanese government bonds to keep 10-year JGB yields around +0.5% and -0.5% from the target level.
- Inflation expectations have shown some upward movements against medium- to long-term inflation expectations and wage growth rise, accompanied by changes in factors such as firms’ wage- and price-setting behaviour.
- Japan’s economy is likely to continue recovering moderately for the time being.
- Next meeting is on 31 October 2023.
Next 24 Hours Bias
Weak Bullish
The Euro (EUR)
Key news events today
Consumer Confidence (2:00 pm GMT)
What can we expect from EUR today?
Consumer confidence in the Eurozone came in at -17.8 in September, which was the lowest figure in six months. Confidence levels declined markedly for the second month in a row as survey respondents became more pessimistic about their household’s past and future financial situation as well as their respective country’s general economic situation. In addition, consumers also signalled lower intentions to make major purchases. October’s reading could show further deterioration of consumer confidence and add downwards pressure on the Euro.
Central Bank Notes:
- The ECB raised the three key interest rates by 25 basis points.
- Economic growth projections have been slightly lowered.
- The Governing Council will ensure interest rates are sufficiently restrictive to achieve the inflation target and keep them at those levels as long as needed.
- Rate decisions will be data-dependent, considering inflation outlook, economic data, underlying inflation dynamics, and monetary policy transmission strength.
- Next meeting is on 26 October 2023.
Next 24 Hours Bias
Medium Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The Swiss franc is one of the worst performing currencies versus the US dollar as the new trading week kicks off. After finding support around the 0.8900-level, USD/CHF bounced strongly this morning to rise towards 0.8950.
Central Bank Notes:
- The SNB unexpectedly kept the policy rate unchanged at 1.75% in September.
- Inflation forecasts remain unchanged at 2.2% for both 2023 and 2024 while it was lowered from 2.1% to 1.9% for 2025.
- SNB predicts modest growth for the rest of the year due to subdued foreign demand, loss of purchasing power from inflation, and stricter financial conditions.
- The projection for GDP growth this year remained unchanged at 1.0%.
- Next meeting is on 14 December 2023.
Next 24 Hours Bias
Medium Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The Pound managed to register a rare weekly gain last Friday but the downturn remains entrenched. After breaking under 1.2100 last week, the Pound retraced higher to close at 1.2160 but downward pressures remain and it is likely to slide lower today.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5-to-4 to maintain its Official Bank Rate at 5.25%.
- Four members preferred to increase the Bank Rate by 0.25 percentage points, to 5.5%.
- CPI inflation is expected to fall significantly further in the near term, reflecting lower annual energy inflation, despite the renewed upward pressure from oil prices, and further declines in food and core goods price inflation. Services price inflation, however, is projected to remain elevated in the near term.
- The mean projection for CPI inflation remained unchanged and is expected to decline to 2.0% and 1.9% at the two and three-year horizons, respectively.
- Next meeting is on 2 November 2023.
Next 24 Hours Bias
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
The Canadian dollar has weakened quite significantly since the end of June causing USD/CAD to rise strongly from 1.3200 to 1.3730 by last Friday. With demand for the greenback remaining strong, this currency pair is likely to remain elevated this week.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%.
- Canada’s economy was more substantial than expected in the second quarter of 2023, with GDP growth of 3.3%.
- The Bank expects CPI inflation to ease to around 3.0% in the summer, but concerns have increased about inflation staying above the 2.0% target.
- Next meeting is on 25 October 2023.
Next 24 Hours Bias
Weak Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
With the ongoing geo-political risks in the Middle East experiencing relative calm over the weekend, tensions appear to be fading and have caused crude prices to tumble this morning as markets re-opened. WTI oil fell under the $87.00 per barrel mark and continued to slide lower during the Asian session. Crude prices could remain under pressure at the beginning of the new trading week. However, any further escalation in this region would likely trigger the next round of demand for such assets.
Next 24 Hours Bias
Medium Bearish
