European Forecast: What to Expect in the Coming Sessions

Explore the latest European economic forecast as Tokyo’s CPI eases, impacting global currency markets. Analyze potential shifts in monetary policy from the Bank of Japan, the Federal Reserve, and other central banks, alongside insights on GDP trends, inflation, and oil prices.

Asia Session Overview

In a notable shift, Tokyo’s core Consumer Price Index (CPI) decreased from 2.4% in August to 2.0% year-on-year in September, aligning with market forecasts. This marks the first instance of decelerating price increases since April, raising speculation that the Bank of Japan (BoJ) may reassess its previously hawkish stance on monetary policy. A potential pivot could weaken the yen, evidenced by the USD/JPY reaching 145.57 during the session.

Implications for European and U.S. Markets

Canada’s monthly GDP indicator, which stalled in July, is anticipated to remain relatively unchanged for August. With economic activity showing signs of stagnation in 2024, a lackluster reading could act as a bearish catalyst for the Canadian dollar, potentially propelling USD/CAD higher.

Dollar Index (DXY) Insights

Key News Today: PCE Price Index (12:30 PM GMT)

The PCE Price Index, favored by the Federal Reserve as an inflation measure, has significantly reduced over the past months. Both headline and core PCE are projected to rise by 0.2% month-on-month in August, marking four consecutive months of stable price growth. Should inflation cool further, expect a sharp sell-off in the dollar during the U.S. session.

Central Bank Notes:

• On September 18, the Federal Reserve reduced the target range for the Federal Funds Rate by 50 basis points to 4.75%-5.00%.
• The Committee aims for maximum employment and a long-term inflation rate of 2%, and it is more confident in achieving this goal.
• Economic indicators suggest solid expansion, although job gains are slowing.
• The Fed monitors incoming data closely and will adjust policy as needed while reducing its Treasury securities holdings.

Market Bias for Next 24 Hours: Weak Bullish for Gold (XAU)

Gold Forecast: With expectations of the PCE Price Index indicating a continued moderation in inflation, gold prices may see an uptick as the dollar weakens.

Australian Dollar (AUD) Analysis

Key News Today: No major news events.

Forecast: After a brief rise above 0.6900, the AUD has retreated to around 0.6880, with support at 0.6795 and resistance at 0.6900. The Reserve Bank of Australia kept its cash rate at 4.35% on September 24, emphasizing caution as inflation remains above the target range.

Market Bias for the Next 24 Hours: Weak Bearish

New Zealand Dollar (NZD) Update

Key News Today: No major news events.

Forecast: The NZD climbed to 0.6332 but has since settled around 0.6320. Support is at 0.6255, and resistance is at 0.6350. The Monetary Policy Committee has recently reduced the OCR, showing confidence in returning inflation to target levels.

Market Bias for the Next 24 Hours: Weak Bearish

European Forecast: What to Expect in the Coming Sessions

Japanese Yen (JPY) Insights

Key News Today: Tokyo Core CPI (11:30 PM GMT on September 26)

Forecast: The easing of Tokyo’s core CPI to 2.0% could lead the BoJ to rethink its hawkish policy stance, resulting in a weaker yen, with USD/JPY trading around 145.50 at the session’s start.

Market Bias for Next 24 Hours: Medium Bullish

Euro (EUR) Analysis

Key News Today: No major news events.

Forecast: The Euro peaked at 1.1189 before slightly retreating to around 1.1170. Support is at 1.1125, and resistance is at 1.1200. The European Central Bank recently cut key interest rates, indicating ongoing vigilance on inflation trends.

Market Bias for the Next 24 Hours: Weak Bearish

Swiss Franc (CHF) Outlook

Key News Today: No major news events.

Forecast: Following a recent 25-basis point rate cut, the franc strengthened, with USD/CHF falling below 0.8500. Current trading levels show stabilization around 0.8450.

Market Bias for the Next 24 Hours: Weak, Bullish

Pound (GBP) Update

Key News Today: No major news events.

Forecast: Cable peaked at 1.3434 before dipping below 1.3400 as markets opened. Support is at 1.3260 and resistance at 1.3430, with the Bank of England maintaining a restrictive policy to tackle persistent inflation.

Market Bias for the Next 24 Hours: Weak Bearish

Canadian Dollar (CAD) Analysis

Key News Today: GDP Report (12:30 PM GMT)

Forecast: With GDP expected to show little change, ongoing economic sluggishness could be a bearish factor for the Loonie, potentially lifting USD/CAD.

Market Bias for the Next 24 Hours: Weak, Bullish

Oil Market Overview

Key News Today: No major news events.

Forecast: Despite China’s substantial stimulus package, crude prices faced downward pressure following reports of Saudi Arabia reconsidering its price target strategy. WTI oil saw a decline from a weekly high of $72.40 to as low as $66.95.

Market Bias for the Next 24 Hours: Medium Bearish

This analysis encapsulates the current market dynamics and potential movements based on economic indicators and central bank decisions. Investors should remain vigilant as markets navigate these developments.

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