22 March 2021 Weekly Analysis
GCMAsia Weekly Report: March 22 – 26
Market Review (Forex): March 15 – 19
US Dollar
The dollar index which traded against a basket of six major currency pairs surged on last week following the Federal Reserve Chairman Jerome Powell claimed during the Federal Reserve monetary policy meeting that the US Central Bank will maintain its stance of aggressive monetary stimulus, reiterating that a near-term spike in inflation would prove only temporary while projecting a significant recovery for economic growth and inflation amid Covid-19 crisis winds down. The sentiment had spurred significant rise in long-term Treasury yields, which providing further bullish momentum on the US Dollar. Dollar Index was closing its price on last Friday session at the price of 91.90.
Last week, the Federal Reserve forecasted the U.S. economy would be growing at 6.5% in the year of 2021 while unemployment rate fall from the previous reading of 5.0% to 4.5% before the end of year 2021. Besides, the US Central Bank expected the inflation to run at 2.4% this year, exceeding the previous forecast at 1.8%. The improvement of US economic progression has shifted the US Central bank’s view with regards to future economic outlook, becoming more positive amid the progress of vaccination program as well as significant declined of Covid-19 infections. In fact, the 10-years U.S. treasury yields hovered around its 14-month high as investors start to factor in the full economic impact of aggressive stimulus plan totaling as much as $1.9 trillion. The big fluctuation in US bond market would indicate that investors seem to be betting on a stronger economic recovery and high inflation rate in future. Indeed, higher bond yielding would attract capital inflow into United States, which spurring significant bullish momentum on the US Dollar.
Nonetheless, as for now investors would continue to scrutinize the latest coronavirus vaccine development, the latest US economic data as well as U.S. Treasury yield movement in order to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY hovered at its high level on last week while ending last Friday session at the price of 108.90. The overall bullish momentum for the pair was mainly due to the appreciation of the US Dollar. Besides, the positive development with regards of the Covid-19 cases had also spurred risk-on sentiment in the FX market, which diminishing market demand on the safe-haven asset such as Japanese Yen. “For the third week in a row, the number of new cases of COVID-19 reported globally fell significantly last week,” WHO Director General Tedros Adhanom Ghebreyesus said at a press conference.
EUR/USD
The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.1860. The overall bearish momentum for the pair of EUR/USD was mainly due to appreciation of the US Dollar. Besides, Euro received further bearish momentum following several countries in Europe have suspended the University of Oxford/AstraZeneca (AZ) Covid-19 vaccine following several suspected deaths were reported due to blood clotting following vaccination, which dragging down the vaccination program in the European region while dialed down the market optimism toward the economic progression in the EU region in future.
GBP/USD
The pair of GBP/USD was edged lower on last week while closing its market price at 1.3820. The overall bearish momentum for the pair of GBP/USD was mainly due to the appreciation of the US Dollar. Moreover, Pound Sterling received further sell-off pressure following Bank of England (BoE) released its dovish tilted stance. During the BoE’s meeting last week, the Monetary Policy Committee (MPC) maintains its interest rate at 0.10%, leaving the bond purchase program unchanged at £875 billion. On the projection front, BoE reiterated that the Covid-19 related restriction of spread of virus would continue to weigh on the economy growth in short-term. Nonetheless, BoE will continue to monitor vaccination process as well as spread of Covid-19 closely, additional tools would be implemented if the outlook of inflation weaken.
Market Review (Commodities): March 15 – 19
GOLD
Gold price slumped tremendously throughout last week with the price of $1735.00 troy ouns amid the falling cases of the global Covid-19 infections had spurred risk-on sentiment in the FX market, which prompting investors shift their portfolio from the safe-haven commodity such as gold toward other riskier asset. Besides, the safe-haven commodity received further bearish momentum as the rising US Treasury yields had prompted investors to shift their portfolio from gold into US Treasury bond, which spurring further bearish momentum on the gold. As for now, investors would focus on the Covid-19 development, US Treasury Yield movements as well as further crucial economic data to gauge the likelihood movement for the commodity.
CrudeOIL
The price of crude oil slumped throughout the week while closing last Friday session with the price of $61.45 per barrel amid the negative Covid-19 vaccine development had spurred market pessimism toward the crude oil demand in future. According to CNBC, major European countries such as France, Italy, Spain and Germany had suspended the use of AstraZeneca vaccine over concerns about blood clots occurring in vaccinated people. Nonetheless, the losses experienced by the crude oil was limited over the backdrop of upbeat inventory data from EIA last week. According to Energy Information Administration (EIA), the U.S Crude Oil inventories had notched down significantly from the preliminary reading of 13.798M to 2.396M, lower than the market forecast at 2.964M.
Weekly Outlook: March 22 – 26
For the week ahead, investors would continue to focus on crucial economic data such as GDP from the US region and Covid-19 development in order to determine further direction.
As for oil traders, they will be eyeing on US inventories level reported by API and EIA to gauge the strength of crude demand for world’s largest oil consumer.
Highlighted economy data and events for the week: March 22 – 26
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 22nd March 2021 | |||||
| 22:00 | USD | Existing Home Sales (Feb) | – | 6.49M | 6.69N |
| Tuesday – 23rd March 2021 | |||||
| 15:00 | GBP | Average Earnings Index +Bonus (Jan) | – | 4.9% | 4.7% |
| 15:00 | GBP | Claimant Count Change (Feb) | – | – | -20.0K |
| 22:00 | USD | New Home Sales (Feb) | – | 876K | 923K |
| Wednesday – 24th March 2021 | |||||
| 15:00 | GBP | CPI (YoY) (Feb) | – | 0.9% | 0.7% |
| 16:30 | EUR | German Manufacturing PMI (Mar) | – | 61.0 | 60.7 |
| 17:30 | GBP | Manufacturing PMI (Mar) | – | 54.9 | 54.9 |
| 17:30 | GBP | Services PMI (Mar) | – | – | 49.5 |
| 20:30 | USD | Core Durable Goods Orders (MoM) (Feb) | – | 0.6% | 1.3% |
| 22:00 | USD | Fed Chair Powell Testifies | – | – | – |
| 22:30 | USD | Crude Oil Inventories | – | 2.964M | 2.396M |
| Thursday – 25th March 2021 | |||||
| 16:30 | CHF | SNB Interest Rate Decision | – | – | -0.75% |
| 16:30 | CHF | SNB Monetary Policy Assessment | – | – | – |
| 17:30 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 17:30 | EUR | ECB President Lagarde Speaks | – | – | – |
| 20:30 | USD | GDP (QoQ) (Q4) | – | 4.1% | 4.1% |
| 20:30 | USD | Initial Jobless Claims | – | – | 770K |
| Friday – 26th March 2021 | |||||
| 15:00 | GBP | Retail Sales (MoM) (Feb) | – | 2.2% | -8.2% |
| 17:00 | EUR | German Ifo Business Climate Index (Mar) | – | 93.2 | 92.4 |