09 January 2023 Weekly Analysis
GCMAsia Weekly Report: January 9 – 13
Market Review (Forex): January 2 – 6
US Dollar
The Dollar Index which traded against a basket of six major currencies seesawed throughout the past week as the mixed economic data disrupted and confused the market sentiment. The dollar index closed its market at 103.60.
Earlier in the week, the US dollar received huge bullish momentum as investors kicked off the year 2023 with an aggressive view regarding the Fed rate hike plan. On the other hand, amid the upbeat labor data, including the JOLTs Job Openings, Initial Jobless Claims, and ADP Nonfarm Payrolls, they gave a boost to the dollar index further. According to the Bureau of Labor Statistics, US JOLTs Job Opening came in at 10.458M, significantly higher than the consensus forecast at 10.000M. Besides, the ADP private payrolls report for the last month of 2022 showed that the number of jobs has increased to 234K, beating the consensus forecast at 150K, signaling that the US labor market remains hot and resilient. On top of that, the Department of Labor also reported the Initial Jobless Claims data with a lower-than-expected reading, which triggered further bullish momentum in the US dollar market. According to the report, the number of Americans who filed for unemployment benefits came in at 204K, missing the economist forecast of 225K, refreshing the record of the lowest number of claims in 14 weeks.
Besides, St. Louis Federal Reserve President James Bullard presented his view on the outlook of the year 2023 earlier today. In the speech, he revealed that the year 2023 may be a disinflationary year, but the policy is not sufficiently restrictive yet. With the backdrop of a hawkish bias statement from Fed Bullard, investors exited from the riskier asset and rushed into the dollar market. However, we have seen the dollar index experiences a sharp decline after the US released its Non-Farm Payrolls and Unemployment Rate data. According to the Department of Labor, US Nonfarm Payrolls and Unemployment Rate came in at 223K and 3.5%, beating the economist forecast at 200K and 3.7% respectively. Although the data showed that the US labor market remain tight and resilient, the market sentiment remained sour as the US services PMI shrank tremendously for the month of December. According to the ISM, US Non-Manufacturing PMI dropped from the prior reading’s 55.0 to 49.6, refreshing the record of first-time contraction since May 2020.
USD/JPY
The pair of USD/JPY extended its gains last week while closing its market price at 132.05. The pairing received bullish momentum following the appreciation of the dollar index. Throughout the past week, the better-than-expected job data had signaled that the US labor market remains resilient and hot. However, the gains of the dollar index were limited by the downbeat US Services PMI data. The weaker-than-expected US Services PMI reading triggered huge sell-off pressures in the greenback market as it indicates contraction in the sector that accounts for more than two-thirds of U.S. economic activity.
EUR/USD
The pair of EUR/USD depreciated last week while closing its market price at 1.0640. The Euro was dragged down by the weaker-than-expected inflation figure in the Eurozone. According to Eurostat, the Eurozone Consumer Price Index (CPI) YoY for December came in at a reading of 9.2%, missing the market forecast of 9.7%. With the backdrop of diminishing inflationary risk, it reduced the likelihood of an aggressive rate hike by the European Central Bank in the near-term future.
GBP/USD
The pair of GBP/USD recorded some losses last week while ending last week’s session at the price of 1.2090. In the last week, Pound Sterling received significant bearish momentum after the US released a series of positive job data. On top of that, due to the BoE’s pessimistic estimation with regard to the economic prospect, the Pound sterling failed to hold its foot from the losses. Despite this, the currency pair still regained its luster and jumped significantly after the US reported the contracting services PMI reading.
Market Review (Commodities): January 2 – 6
GOLD
The gold price skyrocketed throughout the past week while closing its market price at $1865.70 per troy ounce. The rally of the gold price was extended sharply, especially during the last trading session of the week, whereby the economic activity in the US service sector contracted in December with the ISM Services PMI dropping to 49.6 from 56.5 in November. This reading came in much worse than the market expectation of 55. The weaker-than-expected services PMI was mainly attributed to the weakening demand in the sector, while the prices of the services sector eased considerably, providing more evidence that inflation continued subsiding.
CrudeOIL
Crude oil prices ended last week at $73.65 a barrel. Crude oil prices plunged to the ‘red sea’ as investors worried about China’s economic recovery amid stubbornly high coronavirus cases. A few weeks ago, the Chinese government decided to lift Covid-19 restrictions to wake up an economy that has been quarantined for more than two years since the outbreak. As a result, China’s economy looks set for a strong recovery. But unexpectedly, as the economy reopened and the coronavirus epidemic spread uncontrollably, Chinese medical centers that had run out of beds were on the verge of closure. As a result, the outlook for China’s economic recovery is uncertain, casting doubt on near-term oil demand.
Weekly Outlook: January 9 – 13
For the week ahead, investors would continue to focus on crucial economic data such as the US CPI this week in order to determine further direction. Besides that, the ongoing situation with Ukraine-Russia war will also be in the eyes of investors.
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: January 9 – 13
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 9th January 2023 | |||||
| All Day | JPY | Japan – Respect for the Aged Day | – | – | – |
| Tuesday – 10th January 2023 | |||||
| 22:00 | USD | Fed Chair Powell Speaks | – | – | – |
| Wednesday – 11th January 2023 | |||||
| 1:00 | USD | EIA Short-Term Energy Outlook | – | – | – |
| 5:30 | USD | API Weekly Crude Oil Stock | – | – | 3.298M |
| 8:30 | AUD | Retail Sales (MoM) (Nov) | – | 0.70% | -0.20% |
| 23:30 | USD | Crude Oil Inventories | – | – | 1.694M |
| Thursday – 12th January 2023 | |||||
| 21:30 | USD | Core CPI (MoM) (Dec) | – | 0.30% | 0.20% |
| 21:30 | USD | CPI (MoM) (Dec) | – | 0.10% | 0.10% |
| 21:30 | USD | CPI (YoY) (Dec) | – | 6.50% | 7.10% |
| 21:30 | USD | Initial Jobless Claims | – | 220K | 204K |
| Friday – 13th January 2023 | |||||
| 15:00 | GBP | GDP (YoY) | – | – | 1.90% |
| 15:00 | GBP | GDP (QoQ) | – | – | -0.30% |
| 15:00 | GBP | GDP (MoM) | – | -0.30% | 0.50% |
| 15:00 | GBP | Manufacturing Production (MoM) (Nov) | – | -0.20% | 0.70% |
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