European Fundamental Forecast – Weekly Forecast & Analysis!

European Fundamental Forecast – During the Asia session, Japan’s core Consumer Price Index (CPI) surpassed expectations for July, recording year-on-year growth of 3.3%. This figure exceeded the estimated 2.9% and the previous month’s reading of 3.0%. The unexpected increase in core CPI prompts speculation about the Bank of Japan’s ultra-dovish monetary policy stance, potentially influencing inflation concerns. Consequently, the Japanese yen strengthened, leading to USDJPY dropping below 146.00.

Anticipated Developments for the Europe & US Sessions.

The spotlight shifts to a Fed Listens fireside chat on youth employment featuring Federal Reserve President (Chicago) Austan Goolsbee and Governor Michelle Bowman. The presence of hawkish remarks during this discussion could potentially generate a surge in demand for the US dollar, thereby supporting the DXY.

DXY Forecast

Austan Goolsbee, an FOMC member, will address a Fed Listens event in Chicago alongside Federal Reserve Governor Michelle Bowman. Any inclination toward hawkishness in their remarks could contribute to an elevation in DXY gains.

Central Bank Considerations

• The federal funds rate target range: 5.25% to 5.50%.
• A strong commitment to achieving a 2.0% inflation target.
• Readiness to adjust monetary policy in response to emerging risks.
• A comprehensive evaluation of labor market conditions, inflation pressures, expectations, and international factors.

European Fundamental Forecast – Gold Forecast

Austan Goolsbee’s participation in a Fed Listens event, followed by a discussion on youth employment, could trigger hawkish comments affecting the DXY and consequently exert downward pressure on gold prices.

AUD Expectations

The release of the flash Composite PMI data for August will provide insights into the manufacturing and services sectors’ performance. Given the services sector’s contraction in July and subdued manufacturing activity, another round of contraction could weigh on the Australian dollar.

Central Bank Insights

• The RBA maintained the cash rate target at 4.10% for two consecutive meetings.
• Inflation in Australia has receded but needs to return to the target range.
• Potential for further monetary tightening.

NZD Expectations

Retail sales have declined over recent quarters, with expectations for a smaller decline compared to the previous quarter. Weaker-than-expected sales figures could exert downward pressure on the New Zealand dollar.

Central Bank Considerations

• The Monetary Policy Committee held the OCR at 5.50% for three consecutive meetings.
• Balancing interest rates for inflation targeting and sustainable employment.
• Mixed inflation dynamics.

JPY Forecast

Japan’s core CPI exceeded expectations for July, potentially prompting the Bank of Japan to reconsider its ultra-dovish stance. This resulted in a stronger Japanese yen, leading to USD JPY dropping below 146.00.

Central Bank Notes

• Continuation of QQE with Yield Curve Control for 2.0% price stability.
• Yield curve control and policy rate adjustments.
• Inflation fluctuations and economic outlook.
• Gradual economic recovery.

EUR Forecast

Having found support around 1.0850, the Euro rebounded above 1.0900. The Euro’s performance might continue to be influenced by the weakening US dollar.

Central Bank Insights.

• A 25 basis points increase in three key interest rates.
• Adjusting interest rates for inflation targeting.
• Data-dependent rate decisions.
• The next meeting is set for 14 September 2023.

CHF Expectations

Switzerland’s trade surplus declined, potentially prompting increased demand for the Swiss franc and influencing USDCHF.

Central Bank Notes

• SNB policy rate increased to 1.75%.
• Inflation forecast and economic growth projections.
• Moderate growth and inflation expectations.
• The next meeting is scheduled for 21 September 2023.

GBP Forecast

The British Pound’s recent strength, supported by robust inflation data, could persist above the 1.2770 level.

Central Bank Insights

• Bank Rate increased by 0.25 percentage points to 5.25%.
• Various views on rate adjustments.
• Inflation projections.
• The next meeting is scheduled for 21 September 2023.

CAD Expectations

USDCAD initially dropped but later rebounded from its lows, trading around 1.3550. The Canadian dollar’s performance might be influenced by US dollar dynamics.

Central Bank Insights

• The overnight rate target increased to 4.75%.
• Strong first-quarter GDP growth.
• Concerns about inflation exceeding the 2.0% target.
• The next meeting is set for 6 September 2023.

Oil Expectations

Following last week’s drawdown, API stockpile data could affect crude oil prices. Despite recent fluctuations, pressure on crude oil prices is expected to persist. Lastly, don’t forget to read the Market News.  Stay Updated.