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Asia in Focus: Major Central Banks and Their Impact

Asia Central banks

Asia, in focus, delves into the landscape of financial dynamics, spotlighting major central banks and their impact on regional markets.

What occurred during the US session?

The US session saw a marginal decrease in unemployment claims, printing at 217k, slightly below the estimated 218k and last week’s figure of 220k. Despite the lower-than-expected reading, typically considered bullish for the US dollar, it remained relatively high compared to the past eight weeks. Consequently, the Dollar Index (DXY) experienced a decline, reaching 105.35 after the data release.

Federal Reserve Chair Jerome Powell’s panel discussion following this data release provided more insights into the US monetary policy outlook than his previous Wednesday speech. Powell emphasized the central bank’s readiness to tighten policy further if necessary, stating that they need more confidence in having drawn enough to return inflation to 2.0%. The DXY initially surged to 105.83 before settling around 105.95 by the end of the US trading session.

What does this mean for the Asia Session?

The Reserve Bank of Australia (RBA) will release its fourth and final installment of the monetary policy statement for 2023. This statement evaluates current economic conditions, both domestic and international, and outlines the RBA’s outlook for Australian inflation and output growth. If the information conveys a ‘hawkish’ tone and perspective, it could boost today’s Australian Dollar.

Asia in Focus – Major Central Banks and Their Impact

The Dollar Index (DXY)

Key news events today

  • UoM Consumer Sentiment (3:00 pm GMT)
  • UoM Inflation Expectations (3:00 pm GMT)

What can we expect from DXY today?

The University of Michigan (UoM) will review November’s consumer sentiment and inflation expectations. With sentiment trending lower due to inflation concerns and uncertainties, a continued increase in inflation expectations could act as a bullish catalyst for the greenback.

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 over the longer run.
  • The Committee will continue to assess additional information and its implications for monetary policy.
  • The Committee has scheduled its next meeting for December 12 to 13, 2023.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

  • UoM Consumer Sentiment (3:00 pm GMT)
  • UoM Inflation Expectations (3:00 pm GMT)

What can we expect from Gold today?

The University of Michigan (UoM) will review November’s consumer sentiment and inflation expectations. With sentiment trending lower and inflation expectations rising, continued increases could serve as a bullish catalyst for the US dollar, potentially driving gold prices down.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

  • RBA Monetary Policy Statement (12:30 am GMT)

What can we expect from AUD today?

The Reserve Bank of Australia (RBA) will release its fourth and final installment of the monetary policy statement for 2023. The statement may lift the Australian Dollar today if it conveys a ‘hawkish’ tone and outlook.

Central Bank Notes
  • The RBA increased the cash rate target by 25 basis points to 4.35%, marking the first increase in five meetings.
  • Inflation in Australia has passed its peak but remains high and persistent.
  • Further tightening of monetary policy will depend on evolving data and risk assessments.
  • The next meeting is on December 5, 2023.

Next 24 Hours Bias

Medium Bearish

The Kiwi Dollar (NZD)

Key news events today

  • No major news events.

What can we expect from NZD today?

The Kiwi experienced a significant bearish catalyst as Federal Reserve Chair Jerome Powell’s hawkish rhetoric led to a decline. Downward pressures are likely to persist for the Kiwi as the week concludes.

Central Bank Notes
  • The OCR remains unchanged at 5.50% for the third consecutive meeting.
  • The OCR must stay restrictive to achieve the inflation target and support employment.
  • While supply constraints ease, inflation remains high.
  • The next meeting is on November 29, 2023.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

  • No major news events.

What can we expect from JPY today?

Hawkish rhetoric from Federal Reserve Chair Jerome Powell propelled USD/JPY to 151.40. Although there is a slight pullback, the currency pair will likely remain elevated today.

Central Bank Notes
  • The Bank of Japan will continue QQE with Yield Curve Control to achieve the 2.0% price stability target.
  • Yield curve control includes a negative interest rate of -0.1% on policy-rate balances.
  • We anticipate moderate increases in medium- to long-term inflation expectations.
  • The expectation is for Japan’s economy to continue its moderate recovery.
  • The next meeting is on December 19, 2023.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

  • ECB President Lagarde Speaks (12:30 pm GMT)

What can we expect from EUR today?

ECB President Christine Lagarde’s remarks at the Financial Times Global Boardroom could impact the Euro. Following Powell’s hawkish rhetoric, the Euro retraced higher in Asian markets, but downward pressures remain.

Central Bank Notes
  • The ECB kept three key interest rates unchanged.
  • High inflation is to persist, with past interest rate increases continuing to influence financing conditions.
  • The ECB will follow a data-dependent approach to determine the appropriate level and duration of restriction.
  • The next meeting is on December 14, 2023.

Next 24 Hours Bias

Medium Bearish

The Swiss Franc (CHF)

Key news events today

  • No major news events.

What can we expect from CHF today?

Hawkish remarks from Federal Reserve Chair Jerome Powell led USD/CHF to hit 0.9040 overnight, likely keeping the currency pair above the critical 0.9000 threshold today.

Central Bank Notes
  • The SNB unexpectedly kept the policy rate unchanged at 1.75% in September.
  • Forecasts for inflation remain unchanged for 2023 and 2024, but there has been a reduction in projections for 2025.
  • There is a prediction of modest growth for the remainder of the year.
  • The next meeting is on December 14, 2023.

Next 24 Hours Bias

Medium Bullish

The Pound (GBP)

Key news events today

  • GDP (7:00 am GMT)

What can we expect from GBP today?

The UK’s anemic economic growth over the last three quarters, coupled with the Composite PMI contraction, suggests the monthly GDP reading is unlikely to show a marked improvement.¬†Expectations indicate that the Pound will continue to experience pressure following the GDP release.

Central Bank Notes
  • The Bank of England’s MPC voted to maintain the Official Bank Rate at 5.25% by a majority of 6-to-3.
  • CPI inflation persists above the 2% target and will experience a sharp decline in the upcoming quarters.
  • 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 can we expect from CAD today?

Hawkish rhetoric from Federal Reserve Chair Jerome Powell led USD/CAD.

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