IC Markets Asia Fundamental Forecast | 22 March 2024
What happened in the US session?
In a surprise move, the Swiss National Bank (SNB) unexpectedly cut its key policy rate by 25 basis points, lowering it from 1.75% to 1.50%. For some months now, inflation has been back below 2% and thus in the range the SNB equates with price stability. The policy rate cut also supports economic activity and thus ensures that monetary conditions remain appropriate. This easing of monetary policy by the SNB initially weakened the Swiss franc, sending USD/CHF as high as 0.8975 in the immediate aftermath of the release of the statement. This currency pair hit an overnight high of 0.8994 and is likely to climb higher today.
Moving over to the UK, the Bank of England (BoE) kept its official bank rate on hold at 5.25% with a majority vote of 8 to 1 with one member preferring to reduce the bank rate by 25 basis points, to 5.0%. The Pound took a hit as GBP/USD tumbled from 1.2780 to an overnight low of 1.2650 following this dovish outcome.
Meanwhile, unemployment claims in the US continue to signal a resilient labour market as the figure of 210K came in lower than the estimate of 212K while the flash Composite PM reading for the month of March also beat market expectations to highlight strong economic expansion. Both of these data points functioned as a bullish catalyst for the dollar index (DXY) as it broke above the 104-threshold overnight.
What does it mean for the Asia Session?
Despite a dovish outcome at the recent FOMC meeting, dollar bulls have returned following strong US data overnight as the DXY was rising towards 104.20 this morning while gold prices came under pressure. Spot prices for this precious metal dipped under the threshold of $2,200/oz to hit a low of $2,165/oz during the US session. Overhead pressures remain for gold and it could resume the pullback as the day progresses.
The Dollar Index (DXY)
Key news events today
Fed Chair Powell Speaks (1:00 pm GMT)
FOMC Member Barr Speaks (4:00 pm GMT)
What can we expect from DXY today?
Federal Reserve Chairman Jerome Powell is due to deliver the opening remarks at a Fed Listens event in Washington DC while Federal Reserve Governor Michael Barr will be speaking on international economic and monetary design at the Transnational Law Virtual Conference where audience questions are expected. Following Wednesday’s FOMC press conference, traders will be looking out for any fresh clues from the Fed Chair as well as Governor Barr with respect to the outlook on monetary policy. Once again, they have the ability to jawbone bond yields and the dollar towards their intended direction whether it’s lower or higher.
Central Bank Notes:
Next 24 Hours Bias
Medium Bullish
Gold (XAU)
Key news events today
Fed Chair Powell Speaks (1:00 pm GMT)
FOMC Member Barr Speaks (4:00 pm GMT)
What can we expect from DXY today?
Federal Reserve Chairman Jerome Powell is due to deliver the opening remarks at a Fed Listens event in Washington DC while Federal Reserve Governor Michael Barr will be speaking on international economic and monetary design at the Transnational Law Virtual Conference where audience questions are expected. Following Wednesday’s FOMC press conference, traders will be looking out for any fresh clues from the Fed Chair as well as Governor Barr with respect to the outlook on monetary policy. Once again, they have the ability to jawbone bond yields and the dollar towards their intended direction whether it’s lower or higher.
Next 24 Hours Bias
Medium Bearish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
Following yesterday’s blowout employment figures, the Aussie has reversed all of its prior gains as it dived from 0.6600 to fall under 0.6550 as Asian markets came online. This currency pair was under heavy selling pressure and this bearish momentum is likely to extend further today.
Central Bank Notes:
Next 24 Hours Bias
Strong Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
Along with its Pacific neighbour, the Kiwi was one of the weakest currency pairs at the beginning of the Asia session. Strong overhead pressures continue to build for the Kiwi as it tumbled towards the 0.6000-threshold.
Central Bank Notes:
Next 24 Hours Bias
Medium Bearish
The Japanese Yen (JPY)
Key news events today
National Core CPI (11:30 pm GMT 21st March)
What can we expect from JPY today?
Japan’s national core CPI rose to an annual rate of 2.8% in February which was in line with market estimates. This index jumped from 2.0% from the previous month to mark the highest reading in four months. This re-acceleration in core inflation raises concerns that the Bank of Japan (BoJ) will now be forced to maintain a hawkish stance and potentially raise its key policy rate once more. The Japanese yen strengthened upon this news release with USD/JPY dropping from 151.85 to slide under 151.50 – this currency pair could continue to edge lower for the first half of the day.
Central Bank Notes:
Next 24 Hours Bias
Weak Bullish
The Euro (EUR)
Key news events today
German ifo Business Climate (9:00 am GMT)
What can we expect from EUR today?
The German ifo Business Climate has stabilized over the last couple of months as sentiment among German companies has brightened somewhat due to lower levels of pessimistic expectations. The manufacturing sector declined while the business climate in the services sector improved. Should the readings for the month of March beat market expectations, it could provide a much-needed lift for the Euro.
Central Bank Notes:
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
In a surprise move, the Swiss National Bank (SNB) unexpectedly cut its key policy rate by 25 basis points, lowering it from 1.75% to 1.50%. For some months now, inflation has been back below 2% and thus in the range the SNB equates with price stability. The policy rate cut also supports economic activity and thus ensures that monetary conditions remain appropriate. This easing of monetary policy by the SNB initially weakened the Swiss franc, sending USD/CHF as high as 0.8975 in the immediate aftermath of the release of the statement. This currency pair hit an overnight high of 0.8994 and is likely to climb higher today.
Central Bank Notes:
Next 24 Hours Bias
Medium Bullish
The Pound (GBP)
Key news events today
Retail Sales (7:00 am GMT)
What can we expect from GBP today?
The Bank of England (BoE) kept its official bank rate on hold at 5.25% with a majority vote of 8 to 1 with one member preferring to reduce the bank rate by 25 basis points, to 5.0%. The Pound took a hit as GBP/USD tumbled from 1.2780 to an overnight low of 1.2650 following this dovish outcome.
Retail sales in the UK rebounded strongly in January, increasing 3.4% MoM following December’s steep decline of 3.3%. The estimate for February points to choppy sales figures as it is now forecasted to tumble 0.4%. Should sales unexpectedly disappoint market expectations, the Pound is likely to be hit again causing GBP/USD to resume its downward slide.
Central Bank Notes:
Next 24 Hours Bias
Medium Bearish
The Canadian Dollar (CAD)
Key news events today
Retail Sales (12:30 pm GMT)
What can we expect from CAD today?
After growing strongly for the month of December (rising 0.9% MoM), Canada’s retail sales are now expected to fall 0.4% in January to mark the first decline in five months. This would also register the largest monthly drop since March 2023. Should sales print worse than originally anticipated, the Loonie could face heavy selling pressures causing USD/CAD to potentially move higher.
Central Bank Notes:
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Crude oil prices pulled back overnight on news of growing hopes for a ceasefire in Gaza as well as a stronger dollar. A Reuters report stated that the US is set to table a U.N. draft resolution on Friday demanding an immediate ceasefire in Gaza lasting about six weeks which has overshadowed the shrinking the inventory levels as reported by the API and EIA earlier this week – higher drawdowns in these stockpiles typically signal stronger demand for crude oil in the US. WTI oil retreated away from the $82-level and dropped towards $81 per barrel as Asian markets came online.
Next 24 Hours Bias
Medium Bearish
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