03 January 2022 Weekly Analysis
GCMAsia Weekly Report: January 03 – 07
Market Review (Forex): December 27 – 31
US Dollar
The dollar index which traded against a basket of six major currency pairs retreats over the backdrop of a string of bearish economic data as well as a significant surge in Covid-19 cases in United States, insinuating concerns that the authorities have higher possibility to re-implement the Covid-19 restrictions in order to combat the surging cases. The Dollar Index has ended last week session at the price of 95.55.
On the Covid-19 pandemic front, the top U.S. infectious disease expert Anthony Fauci had warned that there was still a danger of surge in hospitalization due to the large number of Covid-19 had been detected despite early data suggest the Omicron variant is less severe. According to data from the US Centers for Disease Control and Prevention (CDC), the Omicron variant was estimated to be 58.6% of Covid-19 variants circulating in the United States as of 25th December 2021. According to Reuters, the Covid-19 cases in United States had came in at record high at 346,869 on Saturday. Besides, the US Dollar extend its losses following the United States released bearish economic data. According to National Association of Realtor, U.S. Pending Home Sales for last month notched down significantly from the previous reading of 7.5% to -2.2%, missing the market forecast at 0.5%.
Nonetheless, the overall movement for the Dollar Index remain subdued as many markets are closed or operating with reduced hours due to holidays session. As for now, investors would continue to scrutinize the latest updates with regards of hospitalization and death rate due to Covid-19 variant as well as crucial economic data in order to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY received bullish momentum on last week while ending last Friday session at the price of 115.25. The Japanese Yen continue to extend its losses amid ultra-loose monetary policy as well as aggressive annual Budget from the Japan government continue to drag down the appeal for the safe-haven Yen. In earlier, Japan’s cabinet had approved an annual budget of $940 billion, underscoring a priority of boosting the economic momentum in Japan region. Market participants remained concerns that the significant amount of government spending combined with the ultra-loos monetary policy would increase money circulation into the economy, which leads to higher inflation rate in future. Nonetheless, the gains experienced by the Japanese Yen was limited over the backdrop of risk-off sentiment in the global financial market amid the spiking numbers of Covid-19 cases around the world.
EUR/USD
The pair of EUR/USD surged throughout the week while ending last week session at the price of 1.1345. The overall momentum for the Euro remained bullish amid depreciation of US Dollar. Besides, the Euro extend its gains following the European Central Bank (ECB) unleashed their hawkish tone toward the economic progression in future. According to Bloomberg, the European Central Bank claimed that they will be ready to increase the interest rate in early 2023 after ending the remaining bond purchases by the end of next year in order to combat the high inflation risk, Governing Council member Klass Knot said. Nonetheless, the gains experienced by the Euro was limited by the rising concerns toward the new Omicron variant. Many European countries are reporting record high numbers of Covid-19 cases, spurring concerns that he authorities to implement Covid-19 restriction in order to cushion the spiking Covid-19 cases.
GBP/USD
The pair of GBP/USD surged last week while closing its market price at 1.3505. The overall momentum for the pair of GBP/USD remained bullish mostly due to the depreciation of US Dollar. Nonetheless, the gains experienced by the Pound Sterling was limited amid rising uncertainty with regards of post-Brexit issues. According to Reuters, British Frozen Food Federation claimed that the new border controls on animal and plants products from the EU could see major delays in the year of 2022. The potential for massive delays and food supply issues in January would cause the price for goods and services in UK increase significantly, spurring higher inflation risk in future while dragging down the appeal for the Pound Sterling.
Market Review (Commodities): December 27 – 31
GOLD
Gold price surged last week with the price of $1828.31 per troy ounce amid spiking numbers of Covid-19 cases around the world had prompted some countries to re-impose lockdown restrictions, which disrupting the global supply chain and leads to labor shortages around the world. The global supply disruption would increase the inflation risk in future, which prompting institutional investors to shift their portfolio toward the safe-have gold in order to hedge against the inflation risk. Besides that, rising Covid-19 cases would be dialing down the market optimism toward the global economic, which prompting investors to sell off their riskier asset while shifting their portfolio into safe-haven gold.
CrudeOIL
The price of crude oil slumped last week while closing last Friday session with the price of $75.40. The oil market edged lower amid rising numbers of Covid-19 Omicron variant around the world, which spurring negative prospect for the crude oil demand. Nonetheless, the losses experienced by the crude oil commodity was limited over the backdrop of bullish inventory data last week. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories came in at -3.576M, better than the market forecast at -3.233M.
Weekly Outlook: January 3 – 7
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims and 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: January 3 – 7
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 3rd January 2022 | |||||
| 16:55 | EUR | German Manufacturing PMI (Dec) | – | 57.9 | 57.9 |
| Tuesday – 4th December 2022 | |||||
| 09:45 | CNY | Caixin Manufacturing PMI (Dec) | – | 50 | 49.9 |
| 11:30 | AUD | RBA Interest Rate Decision (Jan) | – | 0.10% | 0.10% |
| 16:55 | EUR | German Unemployment Change (Dec) | – | -15K | -34K |
| 17:30 | GBP | Manufacturing PMI (Dec) | – | 57.6 | 57.6 |
| 23:00 | USD | ISM Manufacturing PMI (Dec) | – | 60.4 | 61.1 |
| 23:00 | USD | JOLTs Job Openings (Nov) | – | – | 11.033M |
| Wednesday – 5th January 2022 | |||||
| 21:15 | USD | ADP Nonfarm Employment Change (Dec) | – | 390K | 534K |
| 23:30 | USD | Crude Oil Inventories | – | -2.800M | -3.576M |
| Thursday –6th January 2022 | |||||
| 03:00 | USD | FOMC Meeting Minutes | – | – | – |
| 17:30 | GBP | Composite PMI (Dec) | – | 53.2 | 57.6 |
| 17:30 | GBP | Services PMI (Dec) | – | 53.2 | 58.5 |
| 21:30 | USD | Initial Jobless Claims | – | 200K | 198K |
| 23:00 | USD | ISM Non-Manufacturing PMI (Dec) | – | 67.2 | 69.1 |
| Friday – January 2022 | |||||
| 17:30 | GBP | Construction PMI (Dec) | – | 54 | 55.5 |
| 18:00 | EUR | CPI (YoY) (Dec) | – | 4.70% | 4.90% |
| 21:30 | USD | Nonfarm Payrolls (Dec) | – | 400K | 210K |
| 21:30 | USD | Unemployment Rate (Dec) | – | 4.10% | 4.20% |
| 21:30 | CAD | Employment Change (Dec) | – | 27.5K | 153.7K |
| 23:00 | CAD | Ivey PMI (Dec) | – | – | 61.2 |