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1 November 2021                              Weekly Analysis

 

GCMAsia Weekly Report: November 1– 5

Market Review (Forex): October 25 – 29

US Dollar

The dollar index which traded against a basket of six major currency pairs surged significantly last week ahead Fed monetary meeting. The Dollar Index was closing its price on last Friday session at the price of 94.15.

 

Previously, Fed Chairman Jerome Powell and other policymakers hinted that they are ready to start reducing the bond purchases by $120 bilion each month as the Fed’s first move to scale back its stimulus towards the economic. According to the Fed’s meeting minutes on September 21-22, majority of the Fed’s policymakers agreed to taper their asset purchases program as early as mid of November and planned to end it by July of 2022.  Tightening monetary policy would reduce the money circulation for the US Dollar in global financial market, which spurring bullish momentum for the US Dollar. As for now, investors would continue to scrutinize the latest updates with regards of the monetary policy decision from Fed.

 

Nonetheless, the bullish momentum of US dollar was limited amid risk on sentiment. Equity market continue to rally due to recent upbeat quarterly earning reporting season from tech-companies in US such as Tesla, Nvidia, Amazon and others.  The better-than-expected financial performance from big name company have prompted investors to shift their portfolio into riskier assets.

 

On the economic data front, the release of worse-than-expected Gross Domestic Product (GDP) figures has dampened the market sentiment toward the US. According to Bureau of Economic Analysis, U.S. Gross Domestic Product (GDP) for last quarter notched down significantly from the previous reading of 6.7% to 2.0%, missing the market forecast at 2.7%. Nonetheless, the losses experienced by the US Dollar was limited by the upbeat job data. According to Department of Labor, U.S. Initial Jobless Claims came in at 281K, better than the market expectation at 290K.

 

USD/JPY

The pair of USD/JPY received bullish momentum on last week while ending last Friday session at the price of 114.0950. The overall bullish momentum for the pair of USD/JPY last week was mainly due to the release of downbeat Japan economic data. According to Statistics Bureau, Japan Tokyo Core Consumer Price Index (CPI) in October came at the reading of 0.1%, lower than the forecasted reading of 0.3%. In addition, according to Ministry of Economy, Trade and Industry, Japan Industrial Production in September came at the reading of           -5.4%, lower than the forecasted reading of -3.2%. Both data suggested that Japan’s economic grew at a slower pace due to semiconductor shortage and supply chain disruptions in Southeast Asia. Moreover, the Japanese Yen extended its losses amid dovish stances from Bank of Japan (BoJ). Last Thursday, the policymakers of BoJ had announced that there is no any intention of tapering their monetary policy in near term as the Japan’s economic remains subdued.

 

EUR/USD

The pair of EUR/USD had slumped last week while ending last week session at the price of 1.1560. Euro experienced its losses following dovish stances from European Central Bank (ECB). ECB set to keep its interest rate at 0% as the policymakers view the soaring inflation as “transitory” as they expect it to be eased below of the inflation target of 2% in year of 2022. Nonetheless, the bearish momentum of Euro was limited after European Central Bank (ECB)’s policymakers mentioned that its Pandemic Emergency Purchase Programme (PEPP) worth of 1.85 trillion euro is scheduled to end in March of 2022 to curb the current spiking inflation.

 

GBP/USD

The pair of GBP/USD had slumped last week while closing its market price at 1.3690. Pound Sterling depreciated last week amid Brexit woes. Market sentiment toward Pound Sterling was dampened following rising tensions between France and British over the post-Brexit fishing right. On Thursday, Britain has denounced over France’s seizure of a British boat in territorial waters of France, and warned Paris against further retaliation on Thursday, in a rapidly deteriorating row over post-Brexit fishing rights. Previously, France had claimed that Britain refused to grant its fisherman full number of licenses to operate in territorial waters of British. As for now, France has warned British that a potential sanction will be exerted if there is no any progress in talk. Investors would continue to scrutinize on the latest update from further Brexit talk.

 

Market Review (Commodities): October 25 – 29

GOLD

Gold price have slumped last week with the price of $1783.15 per troy ounce amid hawkish expectation from Fed ahead monetary meeting to diminish the appeal for the safe-haven gold. The overall momentum for the gold remained bearish as market participants predicted that the Federal Reserve might start to taper its monetary policy in November in order to curb the soaring inflation driven by spiking commodity prices. The contractionary monetary policy is set to reduce the money circulation in the global financial market hence eliminating the inflation risk while dragging down the appeal for the safe-haven gold.

 

As for now, investors would continue to scrutinize the latest updates with regards of the monetary policy decision from Fed as well as latest economic data to receive further trading signal.

 

CrudeOIL

The price of crude oil dropped slightly last week while closing last Friday session with the price of $83.20. The oil prices received its bearish momentum following the intervention of China government to lower the coal prices. It also followed by intervention of Russia government by monitoring the filing storage facilities of its gas producer, Gazprom. Both easing of coal and natural gas prices will result in lower demand of oil for the usage of switching purpose. Moreover, crude oil extended its losses over the backdrop of downbeat inventory data. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories came in at 4.267M, higher than the market forecast at 1.914M. Nevertheless, the bearish momentum of oil prices was limited by the tight global supply and strengthening fuel demand following the Covid-19 restrictions were lifted around the world.

 

Weekly Outlook: November 1 – 5

For the week ahead, investors would continue to focus on crucial economic data such as the    ADP Nonfarm Employment Change and ISM Non-Manufacturing PMI figures in order to determine further direction. Likewise, investor will also scrutinize on the latest update in regards of Fed Interest Rate Decision.

 

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: November 1 – 5

Time Market Event Actual Forecast Previous
Monday – 1st November 2021
09:45 CNY Caixin Manufacturing PMI (Oct) 50.0 50.0
17:30 GBP Manufacturing PMI (Oct) 57.7 57.7
23:00 USD ISM Manufacturing PMI (Oct) 60.5 61.1
Tuesday – 2nd November 2021
07:50 JPY BoJ Monetary Policy Statement
11:30 AUD RBA Interest Rate Decision (Nov) 0.10% 0.10%
11:30 AUD RBA Rate Statement
16:55 EUR German Manufacturing PMI (Oct) 58.2 58.2
Wednesday – 3rd November 2021
05:45 NZD Employment Change (QoQ) (Q3) 0.4% 1.0%
17:30 GBP Composite PMI (Oct) 56.8 56.8
17:30 GBP Services PMI (Oct) 58.0 58.0
20:15 USD ADP Nonfarm Employment Change (Oct) 400K 568K
22:30 USD Crude Oil Inventories 4.267M
23:00 USD ISM Non-Manufacturing PMI (Oct) 62.1 61.9
Thursday – 4th November 2021
02:00 USD FOMC Statement
02:00 USD Fed Interest Rate Decision 0.25%
03:30 USD FOMC Press Conference
17:30 GBP Construction PMI (Oct) 54.0 52.6
20:00 GBP BoE Interest Rate Decision (Nov) 0.10% 0.10%
20:30 USD Initial Jobless Claims 275K 281K
Friday – 5th November 2021
20:30 USD Nonfarm Payrolls (Oct) 413K 194K
20:30 USD Unemployment Rate (Oct) 4.7% 4.8%
20:30 CAD Employment Change (Oct) 50.0K 157.1K
22:00 CAD Ivey PMI (Oct) 70.4