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The Japanese government tends to release their economic growth forecasts twice a year, one in January and one in July. The latest one should come some time next week and the sources above are saying that they will be cutting its growth forecast for fiscal year ending March 2025.

The revised estimate is to see forecast cut to about 1.0%, down from the current 1.3%. The sources say this reflects the rising living costs that is weighing on consumption for longer than anticipated. Not quite a vote of confidence for the BOJ.

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx +0.2%
• Germany DAX +0.1%
• France CAC 40 +0.4%
• UK FTSE +0.4%
• Spain IBEX +0.1%
• Italy FTSE MIB +0.4%

Despite all of the gains in past few sessions, the CAC 40 index is still down 0.2% on the week currently. That is an indictment that any optimism remains very much on a leash for the time being. For US stocks later, earnings season will come into focus with the big banks set to begin reporting later. S&P 500 futures are flat for now.

This article was written by Justin Low at www.forexlive.com.

Global Markets:

•  Asian Stock Markets : Nikkei down 2.46%, Shanghai Composite up 0.07%, Hang Seng up 2.48% ASX up 0.88%
• Commodities : Gold at $2409.5 (-0.47%), Silver at $31.02 (-1.34%), Brent Oil at $85.93 (0.67%), WTI Oil at $83.21 (0.7%)
• Rates : US 10-year yield at 4.204, UK 10-year yield at 4.115, Germany 10-year yield at 2.488

News & Data:

• (USD) Core CPI m/m  0.1% vs 0.2% expected
• (USD) CPI m/m  -0.1% vs 0.1% expected
• (USD) CPI y/y  3.0% vs 3.1% expected
• (USD) Unemployment Claims  222K vs 236K expected

Markets Update:

Asia-Pacific markets were mixed on Friday following U.S. inflation data for June, which came in at the lowest level in nearly three years, giving the Federal Reserve potential room to adjust interest rates. The U.S. consumer price index rose by 3% year-on-year, a slower increase compared to May’s 3.3%. Core inflation, excluding food and energy costs, increased by 0.1% monthly and 3.3% annually, compared to forecasts of 0.2% and 3.4%.

The yen strengthened against the dollar early Friday after the U.S. inflation data release, leading to speculation of possible intervention by Japan’s Ministry of Finance. The yen traded at 158.55 against the U.S. dollar around 12 a.m. Tokyo time but weakened later to 159.26. Japan’s top currency diplomat, Masato Kanda, stated that authorities would take necessary action in the foreign exchange market, noting recent rapid movements in the yen without confirming any intervention.

In the stock markets, Japan’s Nikkei 225 dropped 2.4%, leading losses in Asia after three days of new highs, while the Topix fell 1.1%. South Korea’s Kospi declined by 1.2%, and the small-cap Kosdaq slipped 0.3%. Conversely, Hong Kong’s Hang Seng index rose by 2.48%, although mainland China’s CSI 300 declined by 0.2%. China’s exports beat expectations, rising 8.6% year-on-year in June, but imports fell 2.3%, widening the trade surplus to $99.05 billion.

Elsewhere, Taiwan’s Weighted Index fell nearly 2%, with major companies Taiwan Semiconductor Manufacturing and Foxconn dropping over 3% and 4%, respectively. Australia’s S&P/ASX 200 rose by 0.8%, nearing its all-time high. In the U.S., the S&P 500 retreated from a record high, falling 0.88%, while the Nasdaq Composite dropped 1.95%, weighed down by a decline in Nvidia. The Dow Jones Industrial Average saw a modest increase of 0.08%.

Upcoming Events: 

• 12:30 PM GMT – CAD Building Permits m/m
• 12:30 PM GMT – USD Core PPI m/m
• 12:30 PM GMT – USD PPI m/m

The post Friday 12th July 2024: Asian Markets Mixed as U.S. Inflation Data Signals Potential Rate Adjustments first appeared on IC Markets | Official Blog.

IC Markets Europe Fundamental Forecast | 12 July 2024

What happened in the Asia session?

It was a fairly quiet session as markets await the release of June’s PPI data later today. The dollar index (DXY) floated around the 104.50-level while gold remained above $2,400/oz. Prices for crude oil were elevated with WTI oil buoyed above $83 per barrel.

What does it mean for the Europe & US sessions?

The PPI – which measures wholesale inflation – marginally eased in May as the headline reading slowed to 2.1%, down from 2.2% YoY in April. Should June’s PPI result follow in the same vein as yesterday’s CPI, it could potentially spark another massive sell-off in the greenback later today.

The Dollar Index (DXY)

Key news events today

PPI (12:30 pm GMT)

What can we expect from DXY today?

The PPI – which measures wholesale inflation – marginally eased in May as the headline reading slowed to 2.1%, down from 2.2% YoY in April. Should June’s PPI result follow in the same vein as yesterday’s CPI, it could potentially spark another massive sell-off in the greenback later today.

Central Bank Notes:

• The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the seventh meeting in a row.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year.
• The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks. Inflation has eased over the past year but remains elevated and in recent months, there has been modest further progress toward the Committee’s 2% inflation objective.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while job gains have remained strong, and the unemployment rate has remained low.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks and does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• Next meeting runs from 30 to 31 July 2024.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Key news events today

PPI (12:30 pm GMT)

What can we expect from Gold today?

The PPI – which measures wholesale inflation – marginally eased in May as the headline reading slowed to 2.1%, down from 2.2% YoY in April. Should June’s PPI result follow in the same vein as yesterday’s CPI, it could potentially spark another massive sell-off in the greenback and potentially boost gold prices once again.

Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie surged from 0.6755 to an overnight high of 0.6798 before reversing to nearly erase all the initial gains. This currency pair was trading around 0.6760 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6750

Resistance: 0.6825

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35%, marking the ninth pause out of the last ten board meetings.
• Over the year to April, the monthly CPI indicator rose by 3.6% in headline terms, and by 4.1% excluding volatile items and holiday travel, which was similar to its pace in December 2023.
• The central forecasts published in May were for inflation to return to the target range of 2–3% in the second half of 2025 and to the midpoint in 2026 while there have been indications that momentum in economic activity is weak, including slow growth in GDP, a rise in the unemployment rate and slower-than-expected wages growth.
• Inflation is easing but has been doing so more slowly than previously expected and it remains high and the Board expects that it will be some time yet before inflation is sustainably in the target range.
• The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.
• Next meeting is on 6 August 2024.

Next 24 Hours Bias

Medium Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

With demand for the greenback plunging overnight, the Kiwi spiked as high as 0.6134 before giving up all the initial gains. This currency pair was trading around 0.6075 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.6070

Resistance: 0.6130

Central Bank Notes:

• The Monetary Policy Committee kept the OCR unchanged at 5.50% for the eighth meeting in a row and agreed that restrictive monetary policy is reducing domestic demand and consumer price inflation.
• The Committee is confident that inflation will return to within its 1-3% target range over the second half of 2024.
• The decline in inflation reflects receding domestic pricing pressures, as well as lower inflation for goods and services imported into New Zealand while recent monthly Selected Price Indexes suggest weakening in some of the more volatile inflation components, while survey measures of cost pressures and pricing intentions have continued to decline.
• Non-performing bank loans and corporate insolvencies have increased from low levels in line with declining economic activity while bank credit growth also remains very subdued, in line with weakness in the domestic economy and low business and consumer confidence.
• Next meeting is on 14 August 2024.

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?

Rumours of an intervention by the Bank of Japan (BoJ) surfaced overnight as the yen strengthened significantly during the U.S. session, gaining over 2%. This surge in the value of the yen caused USD/JPY to dive from 161.50, hitting a low of 157.42, before reversing to climb higher towards 159.50 as Asian markets came online – these are the support and resistance levels for today.

Support: 157.50

Resistance: 160.30

Central Bank Notes:

• The Bank considers that the policy framework of Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control and the negative interest rate policy to date have fulfilled their roles. With the price stability target of 2%, it will conduct monetary policy as appropriate, guiding the short-term interest rate as a primary policy tool.
• The Bank of Japan decided on the following measures:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0 to 0.1% while continuing its Japanese government bonds (JGB) purchases in accordance with the decisions made at the March 2024 MPM.
  2. The Bank decided, by an 8-1 majority vote, that it would reduce its purchase amount of JGBs thereafter to ensure that long-term interest rates would be formed more freely in financial markets.
• Underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• In the second half of the projection period of the April 2024 Outlook for Economic Activity and Prices (Outlook Report), it is likely to be at a level that is generally consistent with the price stability target of 2%.
• The year-on-year rate of increase in the CPI (all items less fresh food), has been in the range of 2.0-2.5% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices have waned. Inflation expectations have risen moderately.
• Japan’s economy has recovered moderately, although some weakness has been seen in part while is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• Next meeting is on 31 July 2024.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

The Euro hit an overnight high of 1.0900 before reversing to nearly erase all the initial gains. This currency pair was trading around 1.0870 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.0855

Resistance: 1.0900

Central Bank Notes:

• The Governing Council today decided to lower the three key ECB interest rates by 25 basis points after nine months of holding rates steady.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 4.25%, 4.50% and 3.75% respectively, with effect from 12 June 2024.
• Since September 2023, inflation has fallen by more than 2.5% and the inflation outlook has improved markedly while underlying inflation has also eased, reinforcing the signs that price pressures have weakened, and inflation expectations have declined at all horizons.
• At the same time, despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year – the latest Eurosystem staff projections for both headline and core inflation have been revised up for 2024 and 2025 compared with the March projections.
• Projections now show headline inflation averaging 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026 while economic growth is expected to pick up to 0.9% in 2024, 1.4% in 2025 and 1.6% in 2026.
• The Council also confirmed that it will reduce the Eurosystem’s holdings of securities under the pandemic emergency purchase programme (PEPP) by €7.5 billion per month on average over the second half of the year.
• The Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner and will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim and is not pre-committing to a particular rate path.
• Next meeting is on 18 July 2024.

Next 24 Hours Bias

Medium Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

As demand for the greenback plunged overnight, USD/CHF tumbled under 0.8920 before retracing higher by the end of the U.S. session. This currency pair was edging higher towards 0.8970 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.8900

Resistance: 0.9000

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points for the second consecutive meeting, going from 1.50% to 1.25% in June.
• The underlying inflationary pressure has decreased again compared to the previous quarter but inflation had risen slightly since the last monetary policy assessment, and stood at 1.4% in May.
• The inflation forecast puts average annual inflation at 1.3% for 2024, 1.1% for 2025 and 1.0% for 2026, based on the assumption that the SNB policy rate is 1.25% over the entire forecast horizon.
• Swiss GDP growth was moderate in the first quarter of 2024 with the services sector continuing to expand, while manufacturing stagnated.
• Growth is likely to remain moderate in Switzerland in the coming quarters as the SNB anticipates GDP growth of around 1% this year while currently expecting growth of around 1.5% for 2025.
• Next meeting is on 26 September 2024.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Cable hit an overnight high of 1.2949 before pulling back towards the 1.2900-threshold. This currency pair hovered around 1.2910 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.2895

Resistance: 1.2950

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7-to-2 to maintain its Official Bank Rate at 5.25% for the seventh consecutive meeting.
• Two members preferred to reduce the Bank Rate by 25 basis points to 5%, an increase of one from the previous meeting.
• Twelve-month CPI inflation fell to 2.0% in May from 3.2% in March, close to the May Monetary Policy Report projection. CPI inflation is expected to rise slightly in the second half of this year, as declines in energy prices last year fall out of the annual comparison.
• Reflecting a margin of slack in the economy, CPI inflation had been projected to be 1.9% in two years’ time and 1.6% in three years.
• UK GDP appears to have grown more strongly than expected during the first half of this year. Business surveys, however, remain consistent with a slower pace of underlying growth, of around 0.25% per quarter.
• UK real GDP had increased by 0.6% in 2024 Q1, 0.2% stronger than had been expected in the May Monetary Policy Report and Bank staff now expect GDP growth of 0.5% in 2024 Q2 as a whole, stronger than the 0.2% rate that had been incorporated in the May Report.
• The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably. It will therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation.
• Next meeting is on 1 August 2024.

Next 24 Hours Bias

Medium Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

With demand for the greenback plunging overnight, USD/CAD reversed 1.3635 to briefly dip under 1.3600 before reversing quite sharply. This currency pair was trading around 1.3630 as Asian markets came online – these are the support and resistance levels for today.

Support: 1.3590

Resistance: 1.3645

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points to 4.75% while continuing its policy of balance sheet normalization.
• Canada’s economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7%, first-quarter GDP growth was slower than forecast in the MPR but consumption growth was solid at about 3%, and business investment and housing activity also increased.
• Inflation remains above the 2% target and shelter price inflation is high but total CPI inflation has declined consistently over the course of this year, and indicators of underlying inflation increasingly point to a sustained easing.
• CPI inflation has eased from 3.4% in December to 2.7% in April while the preferred measures of core inflation have come down from about 3.5% last December to about 2.75% in April and the 3-month rate of core inflation slowed from about 3.5% in December to under 2% in March and April.
• In the labour market, businesses are continuing to hire workers as employment has been growing, but at a slower pace than the working-age population while elevated wage pressures look to be moderating gradually.
• The Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.
• Recent data has increased the council’s confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain.
• Next meeting is on 24 July 2024.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Crude prices rose strongly for the second consecutive day with WTI oil gaining 1.1% overnight. This benchmark climbed above the $83-mark during the U.S. session but it stalled around $83.40 per barrel at the beginning of the Asia session. Despite the strong rally over the past two days, prices look set to notch its first loss in six weeks.

Next 24 Hours Bias

Medium Bullish

The post IC Markets Europe Fundamental Forecast | 12 July 2024 first appeared on IC Markets | Official Blog.