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Asia Focus: Central Bank, Currencies in the Global Market

Asia Central Bank Currencies

Insights on Asia Focus: Central Bank, Currencies in the Global Market Landscape providing forecasts for informed decision-making.

What unfolded during the US session?

Retail sales dropped by 0.1% MoM in the US session, primarily driven by declines in furniture stores, miscellaneous retailers, and motor vehicles and parts dealers. Despite marking the first decrease in seven months, October’s figures were less than initially anticipated.

Simultaneously, the Producer Price Index (PPI), a measure of wholesale inflation, exhibited monthly and annual declines, with headline and core readings falling below their respective estimates.

These releases coincided and prompted a brief uptick in the dollar index (DXY) value, with the DXY rising from 104.00 to 104.50 by the middle of the US session.

What implications does this hold for the Asia Session?

The Labor Force report for Australia, set for release today, projects a gain of 22.8k jobs in October, with an anticipated increase in the unemployment rate from 3.6% to 3.7%. Positive employment figures could boost the Australian Dollar.

Asia Focus: Central Bank, Currencies in the Global Market

The Dollar Index (DXY)

Key news events today

  • Unemployment Claims (1:30 pm GMT)
  • Industrial Production (2:15 pm GMT)

What to anticipate from DXY today?

Unemployment claims have increased for the past three weeks, indicating potential weaknesses in the US labor market—the current forecast of 221k points to another week of increase. If claims exceed 221k, the greenback may face significant selling pressure.

Industrial production steadily grew in the second half of 2023, but October’s estimate indicates a 0.4% MoM decline. The impending fall would be the first in four months and the most significant drop since June. A larger-than-anticipated decline in production could negatively impact the dollar.

Central Bank Notes

The Federal Funds Rate target range remains 5.25% to 5.50% for the second consecutive meeting. The Committee aims for maximum employment and 2.0% inflation in the longer run, continuously assessing information for monetary policy implications. Scheduled for December 12-13, 2023, the next meeting awaits.

Next 24 Hours Bias

Medium Bullish

Gold (XAU)

Key news events today

  • Unemployment Claims (1:30 pm GMT)
  • Industrial Production (2:15 pm GMT)

What to expect from Gold today?

Similar to the Dollar Index analysis, exceeding the forecasted 221k unemployment claims, which puts pressure on the greenback, could boost gold prices. Additionally, a larger-than-expected decline in industrial production may further support gold prices.

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

  • Labour Force Report (12:30 am GMT)

What to expect from AUD today?

Australia’s Labor Force report is set for release today, with a forecasted gain of 22.8k jobs and a slight uptick in the unemployment rate from 3.6% to 3.7%. Stronger-than-expected employment figures could positively impact the Australian Dollar.

Central Bank Notes

The RBA raised the cash rate target by 25 basis points to 4.35%, marking the first increase in five meetings. Inflation in Australia remains elevated but is showing persistence. The need for further tightening will depend on evolving data and risk assessments. The next RBA meeting is on December 5, 2023.

Next 24 Hours Bias

Strong Bearish

The Kiwi Dollar (NZD)

Key news events today

  • No major news events.

What to expect from NZD today?

The Kiwi is exhibiting weakness, hitting a low of 0.6000, and will likely remain under pressure during the Asia and Europe sessions. Poor economic data from the US could lift the currency later in the day.

Central Bank Notes

The Monetary Policy Committee maintained the OCR at 5.50% for the third consecutive meeting. The OCR must stay restrictive to achieve the inflation target and support maximum sustainable employment. While supply constraints ease, inflation remains elevated. Consumer spending needs to match the economy’s capacity to avoid inflationary pressures. The next meeting is on November 29, 2023.

Next 24 Hours Bias

Strong Bearish

The Japanese Yen (JPY)

Key news events today

  • No major news events.

What to expect from JPY today?

Following a brief dollar bounce, USD/JPY climbed to 151.40 overnight but retraced to trade around 151.20 as Asian markets opened. This currency pair could face continued pressure throughout the day.

Central Bank Notes

The Bank of Japan will continue QQE with Yield Curve Control to achieve the 2.0% price stability target. Key measures include a negative interest rate of -0.1% on policy-rate balances and JGB purchases to maintain 10-year yields at around 0%. The outlook suggests moderate rises in inflation expectations, sustained economic recovery, and a positive outlook for prices. The next meeting is on December 19, 2023.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

  • No major news events.

What to expect from EUR today?

A recent US dollar sell-off has bolstered the Euro. Further gains are possible if US economic data shows weakness later today.

Central Bank Notes

The ECB maintained vital interest rates unchanged, with expectations of elevated inflation. The Governing Council will adopt a data-dependent approach to policy decisions. The next meeting is on December 14, 2023.

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

  • No major news events.

What to expect from CHF today?

Following the greenback sell-off, USD/CHF dropped to 0.8855 yesterday and may continue to drift lower today.

Central Bank Notes

The SNB unexpectedly maintained the policy rate at 1.75% in September. Inflation forecasts remain stable, and annual GDP growth predictions are modest. The next SNB meeting is on December 14, 2023.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

  • No major news events.

What to expect from GBP today?

The Pound retraced sharply overnight to 1.2405. With reduced demand for the greenback, the currency could find support around the 1.2400 level before a potential upward move.

Central Bank Notes

The Bank of England’s MPC, with a 6-to-3 vote, expects a decline in CPI inflation that remains above the 2% target, leading to the maintenance of the Official Bank Rate at 5.25%. The next meeting is on December 14, 2023.

Next 24 Hours Bias

Medium Bearish

The Canadian Dollar (CAD)

Key news events today

  • No major news events.

What to expect from CAD today?

A weakened US dollar pushed USD/CAD to 1.3655 overnight. The Canadian Dollar could weaken further with low crude prices, causing USD/CAD to rise.

Central Bank Notes

The Bank of Canada kept the overnight rate at 5.0%. It has revised down growth forecasts as Canada’s economy weakened, and there is an anticipation of sustained high inflation in the near term. Scheduled for December 6, 2023, the next meeting awaits.

Next 24 Hours Bias

Medium Bull

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