17 April 2023 Weekly Analysis
GCMAsia Weekly Report: April 17 – 21
Market Review (Forex): April 10 – 14
US Dollar
The U.S. dollar index, which traded against a basket of six major currencies, extended its downward trend amid sell-off pressure from global investors.
Last week, the dollar index edged up in early the week after the unemployment rate was reduced by 0.1% to 3.5%, indicating the strong labor market and giving more space for Fed to rate hike. However, the dollar’s gains was limited as the International Monetary Fund (IMF) gave a pessimistic outlook of the global economy and lower the global economic growth by 0.1%. IMF announced that the recent banking sector turmoil was caused by the central bank’s aggressive tightening move. Simultaneously, the Federal Open Market Committee (FOMC) minutes meeting in February mentioned that the US economy might enter into recession due to the collapse of Silicon Valley Bank (SVB and Signature Bank. The central bank will consider pausing its tightening move if necessary. The Consumer Price Index (CPI) and Producer Price Index (PPI) further support the Fed for a pause on its tightening move. The CPI was reduced sharply from 6.0% to 5.0% and the PPI showed negative -0.5%, both data below the market expectations.
However, the dollar regained its luster on Friday after hitting the lowest level since April 2022. The following rebound is mainly attributed to the Fed’s members Christopher Waller’s hawkish statement. In the conference, Waller said that the current inflation is still far from the Fed’s 2% target, and the Fed should continue tightening the monetary policy to curb inflation.
USD/JPY
The pair of USD/JPY edged up while closing its market price at 133.97 amid the massive sell-off of the Japanese Yen by investors. The reason for the Yen’s weakening was due to Japan’s new central bank governor Kazuo Ueda maintaining its ultra-loose monetary policy. Ueda signaled that current inflation and economic conditions could not warrant a big rise in interest rates. An increase in interest rate will hurt the domestic economy as the recent rise in inflation was driven by cost-push inflation. The current business is under the pressure of higher costs of raw materials, further tightening will reduce the manufacturing output.
EUR/USD
The pair of EUR/USD was traded up last week while closing its market price at 1.0983. The euro rose against the dollar following the European Central Bank’s (ECB) Nagel hawkish speech. Nagel said that ECB should aggressively tighten monetary policy to curb inflation as the rates are likely to stay at a high level persistently. Core inflation provided a better signal of medium-term inflation, a hawkish statement also spoken by Luis de Guindos, the vice president of the ECB. Core inflation was recorded at 5.7% in February and could rise further before it starts falling. As a result, the high interest of the eurozone will maintain in the medium long term to curb high inflation in European.
GBP/USD
The GBP/USD was traded lower while closing the market at 1.2399. Sterling fell after the release of mixed economic data. According to the British Retail Consortium, retail sales recorded a reading of 4.9%, in line with last month’s reading but above market expectations of 4.2%. Consumer spending remained solid even though consumption on Mother’s Day was down year-over-year as inflation continued to rise. The growth in retail sales came from an 8.9% increase in food sales, while non-food sales rose by 1.8%, which also means that the UK’s spending power is not affected by the high-interest rate environment. However, the effect of high interest started to affect the mortgages and caused the prices to fall -43% in March. However, the Sterling’s losses were capped by Governor Bailey’s speech. Bailey believes that there is no systemic banking risk in the UK, and the current balance sheet of the central bank is larger than the level before the economic crisis. As a result, investors regained confidence in pound, limiting losses in the pound market.
Market Review (Commodities): April 10 – 14
GOLD
Gold prices slipped throughout the week and closed at $2002.72 a troy ounce. Gold prices experienced intense volatility last week after crucial economic data released in the US. The previous gains in gold prices came from the cooled inflation data in the US. The yearly CPI data dropped 1.0% from 6.0% to 5.05, which increase the anticipation of the Fed pausing its rate hike move. In addition, the cooled of PPI data also fueled the gains in gold prices. However, the US dollar regained its luster after the Fed’s Waller hawkish speech. Waller said that the current inflation is still far from Fed’s 2% target and recommended the central bank for more rate hikes to curb inflation. As result, the gold price reverses its trend from gains to losses.
CrudeOIL
Crude oil prices edged up at the end of last week’s session while closing at the price of $82.45 per barrel. The oil prices broke above $81.60 amid Energy Information Administration (EIA) released an optimistic outlook for crude oil. The EIA estimated that crude will rise to $85 a barrel after OPEC and other members curbed supply to stabilize prices. In addition, a weaker dollar has also boosted demand in non-U.S. countries, as other countries can buy crude at cheaper prices.
Weekly Outlook: April 10- 14
For the week ahead, investors would continue to focus on crucial economic data such as Eurozone CPI and China GDP this week to determine further direction. Besides that, the latest situation of the banking sector crisis in US and EU 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: April 17 – 21
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 17th April 2023 | |||||
| 23:00 | EUR | ECB President Lagarde Speaks | |||
| Tuesday – 18th April 2023 | |||||
| 09:30 | AUD | RBA Meeting Minutes | – | – | – |
| 10:00 | CNY | GDP (YoY) (Q1) | – | 4.05 | 2.9% |
| 10:00 | CNY | Industrial Production (YoY) (Mar) | – | 2.6% | 2.4% |
| 14:00 | GBP | Average Earnings Index +Bonus (Feb) | – | 5.1% | 5.7% |
| 14:00 | GBP | Claimant Count Change (Mar) | – | 10.2K | -11.2K |
| 17:00 | EUR | German ZEW Economic Sentiment (Apr) | – | 15.1 | 13.0 |
| 20:30 | USD | Building Permits (Mar) | – | 1.450M | 1.550M |
| 20:30 | CAD | Core CPI (MoM) (Mar) | – | – | 0.5% |
| Wednesday – 19th April 2023 | |||||
| 04:30 | CrudeOIL | API Weekly Crude Oil Stock | – | 0.377M | |
| 14:00 | GBP | CPI (YoY) (Mar) | – | 9.8% | 10.4% |
| 17:00 | EUR | CPI (YoY) (Mar) | 6.9% | 6.9% | |
| 22:30 | CrudeOIL | Crude Oil Inventories | -0.583M | 0.597M | |
| Thursday – 20th April 2023 | |||||
| 06:45 | NZD | CPI (QoQ) (Q1) | – | 1.8% | 1.4% |
| 09:15 | CNY | PBoC Loan Prime Rate | – | – | 3.65% |
| 19.30 | EUR | ECB Publishes Account of Monetary Policy Meeting | – | – | – |
| 20:30 | USD | Initial Jobless Claims | 0.0% | 240k | 239k |
| 20:30 | USD | Philadelphia Fed Manufacturing Index (Apr) | 0.0% | -20.0 | -23.2 |
| 22:00 | USD | Existing Home Sales (Mar) | 0.1% | 4.50M | 4.58M |
| Friday – 21st April 2023 | |||||
| 07:30 | JPY | National Core CPI (YoY) (Mar) | – | 3.1% | 3.1% |
| 15:00 | GBP | Retail Sales (MoM) (Mar) | – | -0.5% | 1.2% |
| 15:30 | EUR | German Manufacturing PMI (Apr) | – | 45.6 | 44.7 |
| 16:00 | EUR | S&P Global Composite PMI (Apr) | – | 54.0 | 53.7 |
| 16;30 | GBP | Composite PMI | – | 52.6 | 52.2 |
| 16;30 | GBP | Manufacturing PMI | – | 48.5 | 47.9 |
| 16;30 | GBP | Services PMI | – | 53.0 | 52.9 |
| 20.30 | CAD | Core Retail Sales (MoM) (Feb) | – | 0.0% | 0.9% |
| 21:45 | USD | S&P Global Composite PMI (Apr) | – | – | 52.3 |
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