5 April 2021 Weekly Analysis
GCMAsia Weekly Report: April 5 – 9
Market Review (Forex): March 29 – April 2
US Dollar
The dollar index which traded against a basket of six major currency pairs was having mixed pattern but eventually managed to end the previous trading week at higher level amid significant surge in US treasury yield as well as the released of upbeat NFP data.
Earlier last week, dollar index managed to extend its rallies following a continuously surge in US 10-year Treasury Yield. Last week, US 10-year Treasury yields did rose to 14-month highs as the selloff in bond markets continued on expectations for stronger growth and inflation ahead. In the recent speech of Fed Chairman Jerome Powell, he has reiterated that the cash rates will maintain at low level for a certain period until a sustainable and stable growth in underlying inflation happened in the nation’s economy. Despite the fairly dovish speech from Fed, the US inflation and economic expectation of investors continue to rise and boosted the yield of treasury, which leaving the US dollar even with higher demand. Besides, the appeal of dollar index has risen further amid the resurgence of virus and behind-scheduled vaccination program in Europe urged the investors to shift their investment toward the US market. On the data front, upbeat NFP data further lifted up the demand of dollar index as it showed that the recovery pace of US economy started to pick up, especially in US employment market.
As of now, market participants are waiting for more catalyst such as the second part of Biden’s infrastructure plan to determine to further direction of dollar index, while keeping their eyes over the development of pandemic around the world.
USD/JPY
The pair of USD/JPY was traded higher throughout the week while closing at the price of 110.55. The main contribution of bullish momentum against this pair of currency was sourced from the significant surge in US dollar. Last week, dollar index rose gradually amid unstoppable rising trend of US treasury yield and the release of positive economic data, which eventually pushing up the value of USD/JPY to the highest level in 1 year.
EUR/USD
EUR/USD was traded flat throughout last week while closing with the price of 1.1910. Last week, this currency pair experienced huge thrown-off pressure amid a fresh wave of coronavirus in Europe swept off the market confidence toward the bloc’s recovery path. According to the statistics, the resurgence of third wave virus is getting serious this week as the public health situation deteriorates in France and Germany. Prior to now, Germany and France have extended their lockdown measure for a longer period in order to curb the spread of new virus strain.
GBP/USD
The pair of GBP/USD have traded higher in overall while ending the market at the price of 1.3835. Earlier last week, pound sterling received bullish momentum after UK and EU reached a consensus in the negotiation about future financial services interaction between two jurisdictions. Last weekend, UK and EU have agreed a memorandum of understanding (MOU) on financial services, however the formal agreement has not been signed by both parties yet as it is still under formal validation process. With the agreement become effective, the MOU sets out a framework for regulatory cooperation and a joint forum for discussing rules and procedures as well as the sharing of relevant information between these two countries. The agreement is similar to the existing deal between US and EU, where the agreement would allow the UK to gain back some access to EU financial services market.
Market Review (Commodities): March 29 – April 2
GOLD
Gold price was traded higher throughout the week while ending the week with a loss at the price of 1728.95 per troy ounce after Biden outlined the first part of infrastructure plan which amounted to $2 trillion dollar in spending over 8 years, while revealing that the packages will most likely to be financed through tax hike on corporation and individual. In details, the packages will include massive spending on transportation infrastructure such as bridges, roads, public transit, environmentally friendly technology, as well as additional funds for childcare and adult care for the elderly and disabled. By implementing this massive plan, Biden said that it could benefit the US, reviving the nation overall economy growth especially the employment market where could create more jobs in the future. On the other side, Biden reiterated that the source of finance for implementing this multi-trillion plan will contributed by the rate hike of corporation from 21% to 28%, while repeating that families earning higher than 400k per year will be imposed by higher income tax. However, the gains of gold was limited following the release of upbeat Nonfarm Payroll data and unemployment data pressured the gold price lower.
CrudeOIL
The price of crude oil managed to extend its gains while closing the market at a gain with the price of 61.05 per barrel despite OPEC+ decided to gradually curb existing output cuts beginning next month.
At the earlier half of the week, the commodity has experience huge selling pressure as the Evergreen cargo ship in Suez Canal has been successfully removed and traffic condition recovered. Prior to that, oil price surged significantly as the blockage of waterway in Suez Canal interrupted the oil transportation that linked Asia and Europe. On the other hand, OPEC and its alliances have decided to increase their production gradually in the upcoming months while revealing that they are optimistic toward the oil market outlook following the rollout of vaccine. In details, an additional 350,000 barrels per day will be added to production in May and June, and the output will be increased by another 450,000 barrels per day in July. Moreover, Saudi Arabia said that they will start to reduce its 1 million bpd voluntarily output cut in May as well. Despite, investors did not affected much by the surprise decision from OPEC+ as they were seeing the adjustment came amid strong recovery in oil market.
As of now, market participants are waiting for more catalyst to determine the direction of crude oil price such as further crude oil inventories data as well as the spread of virus.
Weekly Outlook: April 5 – 9
For the week ahead, investors would continue to focus on the development of new coronavirus as well as economic data to determine the currencies further direction.
As for oil traders, they will be also 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: April 5 – 9
| Time | Market | Event | Actual | Forecast | Previous | ||
| Monday – 5th April 2021 | |||||||
| 22:00 | USD | ISM Non-Manufacturing PMI (Mar) | – | 58.5 | 55.3 | ||
| Tuesday – 6th April 2021 | |||||||
| 12:30 | AUD | RBA Interest Rate Decision (Apr) | – | 0.10% | 0.10% | ||
| 12:30 | AUD | RBA Rate Statement | – | – | – | ||
| 20:00 | CrudeOIL | EIA Short-Term Energy Outlook | – | – | – | ||
| 22:00 | USD | JOLTs Job Openings (Feb) | – | – | 6.917M | ||
| Wednesday – 7th April 2021 | |||||||
| 16:30 | GBP | Services PMI (Mar) | – | – | 56.8 | ||
| 22:00 | CAD | Ivey PMI (Mar) | – | – | 60.0 | ||
| 22:30 | CrudeOIL | Crude Oil Inventories | – | 0.107M | -0.876M | ||
| Thursday – 8th April 2021 | |||||||
| 02:00 | USD | FOMC Meeting Minutes | – | – | – | ||
| 16:30 | GBP | Construction PMI (Mar) | – | 51.0 | 53.3 | ||
| 19:30 | EUR | ECB Monetary Policy Statement | – | – | – | ||
| 20:30 | USD | Initial Jobless Claims | – | 650K | 719K | ||
| Friday – 9th April 2021 | |||||||
| 00:00 | USD | Fed Chair Powell Speaks | – | – | – | ||
| 20:30 | USD | PPI (MoM) (Mar) | – | 0.5% | 0.5% | ||
| 20:30 | CAD | Employment Change (Mar) | – | 09.0K | 259.2K | ||