IC Markets Asia Fundamental Forecast | 1 November 2024
IC Markets Asia Fundamental Forecast | 1 November 2024
What happened in the U.S. session?
The USD exhibited mixed performance. Core PCE Price Index (m/m): The Core Personal Consumption Expenditures (PCE) price index, a primary inflation gauge for the Federal Reserve, increased by 0.3% in September, meeting expectations and slightly above the previous month’s 0.2%. This steady rise indicates continued inflationary pressure within the economy.
Employment Cost Index (q/q): The Employment Cost Index (ECI) rose by 0.8% for the third quarter, slightly below the forecasted 0.9% and marking a slowdown from the previous quarter’s 0.9% gain. This decline in wage growth suggests easing pressure on labor costs, which could impact the Federal Reserve’s monetary policy outlook.
Unemployment Claims at 216,000 came in lower than the forecast of 229,000 and the previous week’s 228,000. This decrease in claims signals a continued strong labor market, with fewer people seeking unemployment benefits, reflecting resilience in employment despite broader economic challenges.
Together with the Core PCE Price Index and Employment Cost Index data, the lower unemployment claims offer a mixed but overall supportive view of the U.S. economy, lending potential stability to the U.S. dollar
What does it mean for the Asia Session?
For the Asia session, U.S. economic data suggests a stable outlook for the USD, with mixed signals on inflation and strong labor market support. This stability could limit USD downside against Asian currencies. Lower unemployment claims may boost risk sentiment, making higher-yielding Asian currencies more attractive, while steady inflation data could encourage cautious optimism in Asian equities and commodities. Overall, the session may see balanced, cautious trading with mild USD support and potential gains in regional risk assets
The Dollar Index (DXY)
Key news events today
Average Hourly Earnings m/m: (12:30 pm GMT)
Non-Farm Employment Change : (12:30 pm GMT)
Unemployment Rate: (12:30 pm GMT)
ISM Manufacturing PMI: ( 2:00 pm GMT)
What can we expect from DXY today?
Today, the U.S. Dollar Index (DXY) is expected to stay relatively stable, supported by steady inflation and a strong labor market. With mixed economic data showing moderated wage growth and lower unemployment claims, market sentiment suggests cautious trading
Central Bank Notes:
- The Federal Funds Rate target range was reduced by 50 basis points to 4.75% to 5.00% on 18th September in an 11 to 1 vote with Governor Michelle Bowman dissenting, preferring to cut rates by a smaller amount.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance.
- The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
- Recent indicators suggest that economic activity has continued to expand at a solid pace while job gains have slowed, and the unemployment rate has moved up but remains low.
- Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.
- 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 slowed 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 6 to 7 November 2024.
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
Average Hourly Earnings m/m: (12:30 pm GMT)
Non-Farm Employment Change : (12:30 pm GMT)
Unemployment Rate: (12:30 pm GMT)
ISM Manufacturing PMI: ( 2:00 pm GMT)
What can we expect from Gold today?
As of November 1, 2024, Gold (XAU/USD) is trading at approximately $2,780 per ounce. Recent U.S. economic data, including a 0.3% month-over-month increase in the Core Personal Consumption Expenditures (PCE) price index and a 0.8% rise in the Employment Cost Index (ECI), suggest steady inflation and moderated wage growth. Additionally, initial unemployment claims decreased to 216,000, indicating a robust labor market.
These factors contribute to a stable U.S. Dollar Index (DXY), which may exert downward pressure on gold prices. However, gold’s status as a safe-haven asset could attract investors amid ongoing geopolitical uncertainties and potential market volatility.
Technical analysis indicates that gold has recently corrected lower after reaching a new all-time high of $2.791. The bullish bias remains intact in the near term, with support levels at $2,715.45 and resistance levels at $2,775
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?
AUD/USD is trading near 0.6592, influenced by strong U.S. economic data and moderate inflation pressures in Australia. While U.S. dollar strength and geopolitical concerns, especially around potential U.S.-China tensions, may limit AUD gains, the pair will likely trade within a narrow range.
Support: 0.6539
Resistance: 0.6592
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.35% on 24th September, marking the seventh consecutive pause.
- Inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance but it is still some way above the midpoint of the 2 to 3% target range.
- The trimmed-mean CPI was 3.9% YoY in the June quarter, broadly as forecast in the May Statement on Monetary Policy (SMP) while headline inflation declined in July as measured by the monthly CPI indicator.
- Headline inflation is expected to fall further temporarily but current forecasts do not see inflation returning sustainably to target until 2026.
- GDP data for the June quarter have confirmed that growth has been weak but growth in aggregate consumer demand, which includes spending by temporary residents such as students and tourists, remained more resilient.
- Broader indicators suggest that labour market conditions remain tight, despite some signs of gradual easing while wage pressures have eased somewhat.
- Data since then have reinforced the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out while agreeing that policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.
- The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions and will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
- Next meeting is on 5 November 2024.
Next 24 Hours Bias
Neutral
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
Today, NZD/USD is trading near 0.5990, facing pressure from strong U.S. economic data and moderated inflation in New Zealand. The pair is likely to trade within a narrow range.
Support: 0.5950
Resistance: 0.5990
Central Bank Notes:
- The Monetary Policy Committee agreed to reduce the OCR by 50 basis points, bringing it down to 4.75% in October as inflation converges to target.
- The Committee assesses that annual consumer price inflation is within its 1 to 3% inflation target range and converging on the 2% midpoint.
- Economic activity in New Zealand is subdued, in part due to restrictive monetary policy while business investment and consumer spending have been weak, and employment conditions continue to soften.
- The economy is now in a position of excess capacity, encouraging price- and wage-setting to adjust to a low-inflation economy; lower import prices have assisted the disinflation.
- High-frequency indicators point to continued subdued growth in the near term, mostly due to weak consumer spending and business investment while labour market conditions are expected to ease further, with filled jobs and advertised vacancy rates continuing to decline.
- The Committee confirmed that future changes to the OCR would depend on its evolving assessment of the economy.
- Next meeting is on 27 November 2024.
Next 24 Hours Bias
Neutral
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
Today, USD/JPY is trading around 153.22, with support from strong U.S. economic data and the Bank of Japan’s commitment to ultra-low interest rates, weakening the yen. The pair may see limited volatility. These are the support and resistance levels for today.
Support: 151.62
Resistance: 153.79
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 31st October, by a unanimous vote, to set the following guideline for money market operations for the intermeeting period:
- The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25%.
- The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
- The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be at around 2.5% for fiscal 2024 and then be at around 2% for fiscal 2025 and 2026.
- While the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices are expected to wane, 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.
- Comparing the projections with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rates are more or less unchanged. The projected year-on-year rate of increase in the CPI (all items less fresh food) for fiscal 2025 is somewhat lower due to factors such as the recent decline in crude oil and other resource prices.
- Japan’s economy 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 19 December 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?
Today, EUR/USD is trading near 1.0859, influenced by stable U.S. economic data that strengthens the dollar. The euro shows resilience. These are the support and resistance levels for today.
Support: 1.0838
Resistance: 1.0893
Central Bank Notes:
- The Governing Council today decided to reduce the three key ECB interest rates by 25 basis points on 17th October to mark the second successive rate cut.
- 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 3.40%, 3.65% and 3.25% respectively.
- The incoming information on inflation shows that the disinflationary process is well on track while the inflation outlook is also affected by recent downside surprises in indicators of economic activity.
- Inflation is expected to rise in the coming months, before declining to target in the course of next year. Domestic inflation remains high, as wages are still rising at an elevated pace. At the same time, labour cost pressures are set to continue easing gradually, with profits partially buffering their impact on inflation.
- The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
- 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 12 December 2024.
Next 24 Hours Bias
Weak Bullish
The Swiss Franc (CHF)
Key news events today
CPI (7:30 am GMT)
What can we expect from CHF today?
Today, USD/CHF is trading near 0.8608, with a stable outlook as the U.S. shows resilient economic data, while the Swiss National Bank’s recent rate adjustment supports a neutral stance. These are the support and resistance levels for today.
Support: 0.8647
Resistance: 1.0893
Central Bank Notes:
- The SNB eased monetary policy by lowering its key policy rate by 25 basis points for the third consecutive meeting, going from 1.25% to 1.00% in September.
- Inflationary pressure has again decreased significantly compared to the previous quarter, reflecting the appreciation of the Swiss franc over the last three months.
- Inflation in the period since the last monetary policy assessment was lower than expected, standing at 1.1% in August compared to 1.4% in May.
- The new conditional inflation forecast is significantly lower than that of June: 1.2% for 2024, 0.6% for 2025 and 0.7% for 2026, based on the assumption that the SNB policy rate is 1.0% over the entire forecast horizon.
- Swiss GDP growth was solid in the second quarter of 2024 as momentum in the chemicals/pharmaceuticals industry was particularly strong.
- However, growth is likely to remain rather modest in the coming quarters due to the recent appreciation of the Swiss franc and the moderate development of the global economy.
- The SNB anticipates GDP growth of around 1% this year while currently expecting growth of around 1.5% for 2025.
- Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term.
- Next meeting is on 12 December 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?
Today, GBP/USD is trading near 1.2913, with a stable outlook. U.S. economic resilience supports the USD, while the UK shows favorable conditions that have boosted the pound this year. These are the support and resistance levels for today.
Support: 1.2801
Resistance: 1.2913
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8 to 1 to maintain Bank Rate at 5.0% while one member preferred to reduce Bank Rate by 25 basis points to 4.75%, on 19th September 2024.
- The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B.
- Twelve-month CPI inflation had been 2.2% in August and July, slightly lower than August Report expectations. Consumer core goods and food price inflation had remained subdued as the cost pressures from previous global shocks had unwound further, and producer price levels had been broadly flat while energy prices had continued to drag on CPI inflation.
- Services price inflation had increased to 5.6% in August compared to 5.2% in July and 5.7% in June. This was slightly lower in August than had been expected at the time of the August Report. There had been volatility in a number of services sub-components in the July and August outturns, including accommodation and catering prices and airfares.
- GDP had increased by 0.6% in 2024 Q2, 0.1 percentage points lower than had been expected in the August Monetary Policy Report. That had followed 0.7% growth in Q1, but Bank staff judged that the underlying pace of growth had been somewhat weaker during the first half of the year.
- Headline GDP growth was expected to return to its underlying pace of around 0.3% per quarter in the second half of the year. Based on a broad set of indicators, the MPC judged that the labour market continued to loosen but that it remained tight by historical standards.
- Monetary policy decisions have been guided by the need to squeeze persistent inflationary pressures out of the system so as to return CPI inflation to the 2% target both in a timely manner and on a lasting basis; policy has been acting to ensure that inflation expectations remain well anchored.
- In the absence of material developments, a gradual approach to removing policy restraint remains appropriate while monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.
- The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.
- Next meeting is on 7 November 2024.
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?
Today, USD/CAD is trading near 1.3946 with a stable outlook. Strong U.S. economic data supports the USD, while the Canadian dollar faces pressure from potential interest rate cuts by the Bank of Canada and trade uncertainties. These are the support and resistance levels for today.
Support: 1.3880
Resistance: 1.3946
Central Bank Notes:
- The Bank of Canada reduced its target for the overnight rate by 50 basis points bringing it down to 3.75% while continuing its policy of balance sheet normalization on 23rd October; this marked the fourth consecutive meeting where rates were reduced.
- Canada’s economy grew at around 2% in the first half of the year and growth of 1.75% is expected in the second half; consumption has continued to grow but is declining on a per person basis while exports have been boosted by the opening of the Trans Mountain Expansion pipeline.
- Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026 – as the economy strengthens, excess supply is gradually absorbed.
- The labour market remains soft with unemployment at 6.5% in September while wage growth remains elevated relative to productivity growth. Overall, the economy continues to be in excess supply.
- Headline CPI has declined significantly from 2.7% in June to 1.6% in September while shelter costs inflation remains elevated but has begun to ease; the preferred measures of core inflation are now below 2.5%.
- Excess supply elsewhere in the economy has reduced inflation in the prices of many goods and services while the drop in global oil prices has led to lower gasoline prices – these factors have all combined to bring inflation down.
- The Bank expects inflation to remain close to the target over the projection horizon, with the upward and downward pressures on inflation roughly balancing out; the upward pressure from shelter and other services gradually diminishes, and the downward pressure on inflation recedes as excess supply in the economy is absorbed.
- With inflation now back around the 2% target, the Governing Council decided to reduce the policy rate by 50 basis points to support economic growth and keep inflation close to the middle of the 1% to 3% range.
- If the economy evolves broadly in line with the latest forecast, further reduction of the policy rate can be expected but the timing and pace of additional reductions in the policy rate will be guided by incoming information and assessment of its implications for the inflation outlook.
- The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
- Next meeting is on 11 December 2024.
Next 24 Hours Bias
Medium Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Today, oil prices are elevated, with Brent crude around $74.12 and WTI at $70.61, driven by geopolitical tensions, particularly concerns over potential conflict involving Iran and Israel, and expectations that OPEC+ may delay production increases. In the forex market, this could support oil-linked currencies like the Canadian dollar (CAD) and Norwegian krone (NOK), while potentially pressuring the currencies of oil-importing countries.
Next 24 Hours Bias
Weak Bearish
The post IC Markets Asia Fundamental Forecast | 1 November 2024 first appeared on IC Markets | Official Blog.
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