IC Markets Europe Fundamental Forecast | 15 June 2023
What happened in the Asia session?
New Zealand’s GDP contracted by -0.1% as expected, an improvement from -0.7% previously, causing potential long-term pressure on NZD.
Japan’s Core Machinery Orders rose by 5.5% versus the predicted 3.1%, and the Trade Balance deficit improved to -0.78T from -1.04T, supporting a stronger JPY.
The Australian dollar received a boost with Employment Change reaching 75.9K, well above the forecast of 18.6K, and a reduced Unemployment Rate of 3.6% from 3.7%.
What does it mean for the Europe & US Sessions?
The ECB is expected to increase interest rates by 25 bps. A lower-than-expected deviation could see the EUR/USD pair decline to an intra-day trough of around 1.0770. A higher rate hike would allow the Euro to challenge the recent highs of about 1.0860. A hike in line with the expectations of 4.00% would see the pair trade between the levels mentioned.
The Dollar Index (DXY)
Key news events today
Core Retail Sales m/m
Empire State Manufacturing Index
Retail Sales m/m
Unemployment Claims
What can we expect from DXY today?
The upcoming data releases for the USD include Core Retail Sales m/m (+0.1% forecasted, +0.4% previous), Empire State Manufacturing Index (-15.0 forecasted, -31.8 previous), Retail Sales m/m (-0.2% predicted, +0.4% last), and Unemployment Claims (246K forecasted, 261K previous). The expected increase in Core Retail Sales suggests slight growth, while the decline in the Empire State Manufacturing Index and forecasted decrease in Retail Sales indicate potential weaknesses. However, the projected decrease in Unemployment Claims signifies a healthier labour market. The impact on the USD currency may be mixed, depending on the relative significance of each indicator and market sentiment.
Central Bank Notes:
- The federal funds rate target range will be 5 to 5-1/4 per cent.
- The Committee is strongly committed to returning inflation to its 2% 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 is on 26 July 2023
Next 24 Hours Bias
Mixed
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
The expectation of delayed rate cuts by the Fed may increase demand for gold as a safe-haven asset. The decision also implies a relatively low opportunity cost of holding gold compared to alternative investments.
Next 24 Hours Bias
Weak bullish
The Australian Dollar (AUD)
Key news events today
Employment Change
Unemployment Rate
What can we expect from AUD today?
Australia’s Employment change is expected to increase by 18.6K (previous data showed a decrease of 4.3K), and the unemployment rate is expected to remain stable at 3.7% (same as last data). These data releases are likely to have a moderate impact on the AUD. If the actual employment change exceeds the forecasted figure, it could be positive for the economy, potentially strengthening the AUD. However, since the forecasted and previous unemployment rate remains unchanged, it is unlikely to impact the currency significantly.
Central Bank Notes:
- The RBA increased the cash rate target by 25 basis points to 4.10%.
- Inflation in Australia has passed its peak but remains high at 7% and needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting on 4 July 2023
Next 24 Hours Bias
Mixed
The Kiwi Dollar (NZD)
Key news events today
GDP q/q
What can we expect from NZD today?
The upcoming data release for New Zealand’s GDP q/q is expected to show a 0.1% decline, following a previous contraction of 0.6%. The forecasted decrease in GDP may negatively impact the NZD, as it could reduce investor confidence and demand for the currency.
Central Bank Notes:
- The Monetary Policy Committee has raised the OCR from 5.25% to 5.50%
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the target range while supporting maximum sustainable employment
- The Committee voted by a majority of five to two to increase the OCR by 25 basis points to 5.50%
- Interest rates must remain restrictive to ensure inflation returns to the target range while supporting maximum sustainable employment
- Next meeting is on 12 July 2023
Next 24 Hours Bias
Weak bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The upcoming data releases from Japan are as follows: Core Machinery Orders m/m: 3.1%, Trade Balance: -0.81T, and Tertiary Industry Activity m/m: 0.5%. Previous data show declines in Core Machinery Orders (-3.9%) and Tertiary Industry Activity (-1.7%), while the Trade Balance was -1.02T. Positive data exceeding the forecasts could strengthen the JPY, while disappointing figures may weaken the currency.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2%
- Japan’s economy is expected to recover gradually
- The bank will not hesitate to take additional easing measures if necessary
- Next meeting is on 15 June 2023
Next 24 Hours Bias
Mixed
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The forecasted Main Refinancing Rate is 4.00%, higher than the previous rate of 3.75%. A rate increase may strengthen the EUR, while a decrease could weaken it. The Monetary Policy Statement and the ECB Press Conference will provide insights into the ECB’s outlook and policy intentions, influencing market sentiment. Positive remarks and a confident tone may boost the EUR, while concerns or cautious statements could weigh on the currency.
Central Bank Notes:
- The ECB has decided to raise the three key interest rates by 25 basis points as the inflation outlook continues to be too high for too long.
- The ECB will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
- Renewed financial market tensions and Russia’s war against Ukraine remain significant economic downside risks.
- The continued resilience of the labour market could lead to higher growth than anticipated.
- Next meeting on 15 June 2023
Next 24 Hours Bias
Weak bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The previous Swiss PPI m/m data showed a 0.2% increase, while the forecasted figure is 0.1%. If the predicted data is lower, it may indicate a slowdown in inflationary pressures, potentially decreasing the value of the CHF.
The SECO Economic Forecasts provide a comprehensive outlook for the Swiss economy, and positive forecasts could strengthen the CHF, while negative predictions may lead to a decline in its value.
Central Bank Notes:
- Raised policy rate to 1.5% to counter inflationary pressure and ensure price stability. The SNB may need to raise the policy rate further in the future
- The SNB is providing liquidity assistance to Credit Suisse, and the crisis has been halted
- The new inflation forecast assumes a policy rate of 1.5% and puts average annual inflation at 2.6% for 2023 and 2.0% for 2024 and 2025.
- Mortgage and real estate market vulnerabilities persist
- Next meeting on 22 June 2023
Next 24 Hours Bias
Mixed
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
MPC Member Jon Cunliffe is set to participate in a moderated discussion titled “Central Banks and the Future of Payments” at the Politico Global Tech Summit in London. Traders will closely monitor the summit’s outcome as it could provide valuable insights into the Bank of England’s future policies.
Central Bank Notes:
- The MPC of the BoE voted 7-2 to increase Bank Rate by 0.25 percentage points to 4.5%.
- The updated projections show that CPI inflation is expected to decline slightly above 1% at the two and three-year horizons, below the 2% target.
- CPI increased unexpectedly but is expected to fall sharply over the rest of the year due to lower energy prices.
- Next meeting on 22 June 2023
Next 24 Hours Bias
Mixed
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
The forecasted Housing Starts value is 239K (a decrease from the previous 262K), indicating a potential slowdown in the housing market. For Manufacturing Sales m/m, the forecasted value is -0.2% (a decrease from the previous 0.7%), suggesting a contraction in the manufacturing sector. If the actual data aligns with the forecast, it could negatively impact CAD, indicating a weaker housing market and reduced economic activities.
Central Bank Notes:
- The Bank of Canada increased its target for the overnight rate to 4.75%.
- Canada’s economy was more substantial than expected in the first quarter of 2023, with GDP growth of 3.1%.
- The Bank expects CPI inflation to ease to around 3% in the summer, but concerns have increased about inflation staying above the 2% target.
- Next meeting on 12 July 2023
Next 24 Hours Bias
Weak bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
There has been an increase in US crude stocks, as reported by the Energy Information Administration (EIA). On a positive note, the International Energy Agency (IEA) has revised its 2023 oil demand growth projection to 2.4 million barrels per day (bpd). These developments create a mixed impact on the oil market, with the rise in US crude stocks potentially exerting downward pressure on prices. At the same time, the IEA’s upgraded demand forecast suggests a favourable environment for oil producers.
Next 24 Hours Bias
Mixed
