02 August 2021 Weekly Analysis
GCMAsia Weekly Report: August 2 – 6
Market Review (Forex): July 26 – 30
US Dollar
The dollar index which traded against a basket of six major currency pairs slumped over the backdrop of string of negative economic data from the region of United States last week. Besides, the US Dollar extend its losses following the Federal Reserve unleashed their dovish statement during the FOMC meeting. The Dollar Index was closing its price on last Friday session at the price of 92.05.
According to the FOMC statement, the Federal Reserve claimed that they will continue to maintain its expansionary monetary policy while suing its full range of tools to support the U.S. economy. Despite some of the indicators of economic activity and employment rate have shown some improvement following the rapid Covid-19 vaccination progress in Untied States, though its have not fully recovered yet, according to the FOMC statement. Meanwhile, The Chair of the Federal Reserve Jerome Powell claimed that the higher inflation in United States was mainly due to transitory factors. Besides, the Fed had decided to maintain their federal fund rate at 0 to ¼% while maintaining its bond buying program until substantial further progress has been made toward its maximum employment and price stability goals. Aggressive monetary policy would be increasing the money circulation in the financial market, which diminishing the appeal of the US Dollar.
On the economic data front, most of the crucial economic data from Unites States had fared worse than expectation results. According to Department of Labor, U.S. Initial Jobless Claims came in at 400K, worse than the market expectation at 380K. In addition, U.S Gross Domestic Product (GDP) and U.S. Pending Home Sales came in at 6.5% and -1.9%, which both fared worse than market expectation at 8.5% and 0.3% respectively. Bearish data had spurred negative prospect for the US economic growth, which diminishing the appeal of the US Dollar. As for now investors would continue to scrutinize the latest updates with regards future economic data as well as the monetary policy updates to gauge the likelihood movement for the US dollar.
USD/JPY
The pair of USD/JPY received bearish momentum on last week while ending last Friday session at the price of 109.65. The overall bearish momentum for the pair of USD/JPY was mainly due to the depreciation of the US Dollar. Besides, spiking numbers of the Delta variant in Asian region had also stoked a shift in sentiment toward safe-haven asset, which increasing the appeal of the Japanese Yen.
EUR/USD
The pair of EUR/USD surged throughout the week while ending last week session at the price of 1.1800. The overall bullish momentum for the pair of EUR/USD last week was mainly due to the depreciation of the US Dollar. On the economic data front, most of the crucial data had came in at mixed results. According to Eurostat, the Eurozone Consumer Price Index (CPI) had improved significantly from the previous reading of 1.9% to 2.2%, higher than the market forecast at 2.0%. Meanwhile, Germany Gross Domestic Product (GDP) came in at only 1.5%, which fared worse than the market expectation at 2.0% while limiting the gains experienced by the Euro.
GBP/USD
The pair of GBP/USD soared last week while closing its market price at 1.3735. Pound sterling was traded higher last week amid the positive development of the Covid-19 pandemic from United Kingdom. Recently, UK had recorded a downward trend in Covid-19 cases for six consecutive days. According to UK top epidemiologist Neil Ferguson, with the rapid vaccination program in the United Kingdom, the hospitalization and death rate due to the Covid-19 virus remained stable. Meanwhile, he also reiterated that the pandemic in UK might be end in next few months. As for now, investors would continue to focus the Covid-19 pandemic in UK to receive further trading signal.
Market Review (Commodities): July 26 – 30
GOLD
Gold price surged last week with the price of $1815.00 per troy ounce amid Federal Reserve unleashed its dovish statement. Market participants speculated that the continuing expansionary monetary policy from the Federal Reserve would increase the inflation risk in future, which prompting investors to shift their portfolio toward the safe-haven gold to hedge against those risk. Nonetheless, the gains experienced by the safe-haven gold was limited following one of the Fed members had released different view on the future policy. According to Reuters, the member of Federal Reserve James Bullard claimed that the Fed should start to reduce its $120 billion in monthly bond purchases and contract its monetary policy in the first months of 2022 and paves the way to increase interest rate that year if needed in order to combat the high inflation risk. Bullard was the first Fed member to speak publicly following the central bank’s meeting this week. Nonetheless, Fed Chair Jerome Powell said that the US job market recovery still “a way off” from Fed’s target while Fed still needed to maintain its aggressive monetary policy to boost the economic momentum. The overall statement from the Fed remained vague, hence investors should continue to scrutinize the latest updates with regards of the future monetary policy plan to gauge the likelihood movement for the gold commodity.
CrudeOIL
The price of crude oil surged significantly last week while closing last Friday session with the price of $73.15. The crude oil price received bullish momentum amid positive inventory data as well as positive prospect for the global Covid-19 vaccination program. Market participants remained optimism that the rapid process of the vaccination would able to enhance the oil demand in future. According to Energy Information Administration (EIA), U.S. Crude Oil inventories notched down from the previous reading of 2.108M to -4.089M, better than the market forecast at -2.9328M.
Weekly Outlook: August 2 – 6
For the week ahead, investors would continue to focus on crucial economic data such as US Nonfarm Payroll in order to determine further direction. Besides that, the ongoing situation with coronavirus 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 2 – 6
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 2nd August 2021 | |||||
| 15:55 | EUR | German Manufacturing PMI (Jul) | – | 65.6 | 65.6 |
| 16:30 | GBP | Manufacturing PMI (Jul) | – | 60.4 | 60.4 |
| 22:00 | USD | ISM Manufacturing PMI (Jul) | – | 60.9 | 60.6 |
| Tuesday – 3rd August 2021 | |||||
| 12:30 | AUD | RBA Interest Rate Decision (Aug) | – | 0.10% | 0.10% |
| 12:30 | AUD | RBA Rate Statement | – | – | – |
| Wednesday – 4th August 2021 | |||||
| 06:45 | NZD | Employment Change (QoQ) (Q2) | – | 0.70% | 0.60% |
| 09:30 | AUD | Retail Sales (MoM) (Jun) | – | -1.80% | 0.40% |
| 16:30 | GBP | Services PMI (Jul) | – | 57.8 | 57.8 |
| 20:15 | USD | ADP Nonfarm Employment Change (Jul) | – | 700K | 692K |
| 22:00 | USD | ISM Non-Manufacturing PMI (Jul) | – | 60.4 | 60.1 |
| 22:30 | USD | Crude Oil Inventories | – | – | -4.089M |
| Thursday – 5th August 2021 | |||||
| 16:30 | GBP | Construction PMI (Jul) | – | 63.8 | 66.3 |
| 19:00 | GBP | BoE Interest Rate Decision (Aug) | – | 0.10% | 0.10% |
| 20:30 | USD | Initial Jobless Claims | – | 380K | 400K |
| Friday – 6th August 2021 | |||||
| 20:30 | USD | Nonfarm Payrolls (Jul) | – | 900K | 850K |
| 20:30 | USD | Unemployment Rate (Jul) | – | 5.70% | 5.90% |
| 20:30 | CAD | Employment Change (Jul) | – | 150.0K | 230.7K |
| 22:00 | CAD | Ivey PMI (Jul) | – | – | 71.9 |