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1 August 2022                        Weekly Analysis

 

GCMAsia Weekly Report: August 1 – 5

 

Market Review (Forex): July 25 – 29

US Dollar

The Dollar Index which traded against a basket of six major currencies retreated from its highest level recently over the backdrop of string of negative economic data, indicating that the current US business activity had contracted as the spiking inflation risk, rising borrowing cost as well as deteriorating consumer confidence continue to jeopardize. Besides, the US Dollar extend further losses following the Jerome Powell hints Fed could slow pace of rate hikes in future. As of last Friday, the Dollar Index close at 105.85.

 

On the economic data front, most of the crucial economic data from United States had fared downbeat reading, dialing down the market optimism toward the economic progression in the United States. The latest statistics had shown that the US economy contracted for the second straight quarter from April to June, spurring further fears upon the recession risk in future. According to Bureau of Economic Analysis, US Gross Domestic Product (GDP) for last quarter came in at -0.9%, missing the market forecast at 0.50%. In addition, a separate report Thursday showed that the job market in the United States still remained pessimistic. According to Department of Labor, Initial Jobless Claims came in at 256K, which also missing the market forecast at 253K.  The decline in GDP came from broad swath of factors, including decrease in in gross private domestic investment, reducing personal consumption expenditures as well as rising inflation cost.

 

The US Federal Reserve over the past four months has increased their benchmark interest rates by 2.25%. With 0.75% increases in June and July, marking the most aggressive two-month rate hikes as the primary policy tool to stabilize the inflation risk. Though, the Fed chief only offered little specific guidance about what to expect during the next monetary policy, but reiterating that they will put a heavy focus on two months of upcoming data to plan for the future monetary policy. As for now, investors would continue to scrutinize the latest economic data such as Nonfarm Payroll to receive further trading signal.

 

USD/JPY

The pair of USD/JPY was traded lower last week while closing its market price at 132.35. The pair of USD/JPY slumped significantly since the Federal Reserve announced their monetary policy, which reducing further expectation for rate hikes caused the hedge funds to cover short bets from one of the biggest global macro trades of the year. The expectation of less aggressive rate hike from Fed had narrowed the yield gap which had opened up between Japan and the United States. The US yield falling back to 2.6% from a high around 3.5%.

 

EUR/USD

The pair of EUR/USD surged last week while closing its market price at 1.0230. The overall trend for Euro was traded higher amid depreciation of US Dollar. Nonetheless, rising tensions between Russia-Ukraine issue continue to limit the gains experienced by Euro as market participants remained concerns toward the economic progression in European region. According to Reuters, Russia claimed that they will deliver less gas to Europe on Wednesday, pressuring the European Union economic further with higher cost. Russia Gazprom had reduced the capacity of Nord Stream 1 pipeline – the major delivery route to Europe for Russia gas – to 20% of its total capacity. The natural gas supply disruption would likely to add further tensions for the economic momentum in European region with higher cost of raw materials for the companies.

 

GBP/USD

The pair of GBP/USD appreciated last week while ending last week session at the price of 1.2190. Due to lack of market catalyst from UK region, the overall trend for the pair for of GBP/USD was mostly determined by the US Dollar. Though, as for now investors would continue to scrutinize further crucial economic data as well as the monetary policy decision to auge the likelihood movement for the currency.

 

Market Review (Commodities): July 25 -29

GOLD

Gold price appreciated last week while closing its market price at $1763.80 per troy ounce. Gold price surged significantly as a contraction in US economy continue to insinuate market demand on the safe-haven asset. Meanwhile, the gold market extends its gains following the Federal Reserve chairman Jerome Powell unleashed his less aggressive tone toward the economic momentum. After the GDP data confirmed recessionary fears, market participant speculated the Fed will be slower to introduce rate hikes, reducing value for the US Dollar while boosting the market demand on the gold. Currently, market participants will highly focus on the latest job data from United States to receive further trading signal.

 

CrudeOIL

Crude oil price seesawed while ending last week session at the price of $97.45 per barrel. The crude oil price received bullish momentum amid market participants focus to the next OPEC+ meeting and dimming expectation that the producer group will imminently boost supply. Investors will next watch the 3rd August of the OPEC meeting. OPEC+ sources claimed that the group will consider keeping oil output unchanged for September. Besides that, the oil market extends its gains amid the rising tension between Russia-Ukraine. According to Reuters, Russia continues to strike the southern Ukrainian port city of Mykolaiv early on Sunday, killing the owner of one of the country’s largest grain exporters. Though, the gains experienced by the crude oil was limited following the release of data from oil services firm Baker Hughes, which showed that US driller added crude rigs for a record 23 months in a row, indicating more supply ahead. In July, the oil rig count rose 11, increasing for a record 23rd month in a row. In addition, the crude oil price extends its losses further following the weak manufacturing data from China and Japan for July weighed down the outlook for demand.

 

Weekly Outlook: August 1 – 5

For the week ahead, investors would continue to focus on crucial economic data such as the NFP 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: August 1 – 5

Time Market Event Actual Forecast Previous
Monday – 1st August 2022
All Day CHF Switzerland – National Day
All Day CAD Canada – Civic Holiday
9:45   CNY Caixin Manufacturing PMI (Jul) 51.5 51.7
15:55   EUR German Manufacturing PMI (Jul) 49.2 49.2
16:30   GBP Manufacturing PMI (Jul) 52.2 52.2
22:00   USD ISM Manufacturing PMI (Jul) 52 53
Tuesday – 2nd August 2022
12:30   AUD RBA Interest Rate Decision (Aug) 1.85% 1.35%
12:30   AUD RBA Rate Statement
22:00   USD JOLTs Job Openings (Jun) 11.000M 11.254M
Wednesday – 3hb August 2022
6:45   NZD Employment Change (QoQ) (Q2) 0.40% 0.10%
16:30   GBP Composite PMI (Jul) 52.8 52.8
16:30   GBP Services PMI (Jul) 53.3 53.3
22:00   USD ISM Non-Manufacturing PMI (Jul) 53.5 55.3
22:30   USD Crude Oil Inventories -4.523M
Thursday – 4th August 2022
12:30   INR Interest Rate Decision 4.90%
16:30   GBP Construction PMI (Jul) 52.1 52.6
19:00   GBP BoE Interest Rate Decision (Aug) 1.50% 1.25%
19:30   GBP BoE Gov Bailey Speaks
20:30   USD Initial Jobless Claims 255K 256K
Friday – 5th August 2022
12:30   INR Interest Rate Decision 4.80% 4.90%
20:30   USD Nonfarm Payrolls (Jul) 250K 372K
20:30   USD Unemployment Rate (Jul) 3.60% 3.60%
20:30   CAD Employment Change (Jul) 15.0K -43.2K
22:00   CAD Ivey PMI (Jul) 62.2

 

 

Risk Statement:

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