03 July 2023 Weekly Analysis
GCMAsia Weekly Report: July 3 – July 7
Market Review (Forex): June 26 – June 30
US Dollar
The Dollar Index which traded against a basket of six major currencies managed to extend its foot of gains amid market risk aversion surged, Powell hawkish comment and a series of upbeat economic data were released throughout the week. The dollar index ended the trading session at the price of 102.55.
Earlier in the week, the further tightening moves from the central banks soured the risk sentiment in the market. Last week, a number of central banks which including Swiss National Bank (SNB) and Bank of England (BoE) have adjusted their official cash rate upward, whereby BoE even increased their interest rate more than market expectation. Theoretically, a higher interest rates are generally good for currencies, but the risk that higher rates could lead to a recession in the U.K. has hit the pound, prompting some investors to seek safe havens such as the U.S. dollar.
Besides, the hawkish comment from Jerome Powell with regards the US monetary policy path spurred the sentiment of the dollar index. In the ECB Economic Forum, Federal Reserve Chairman Jerome Powell struck a hawkish tone on inflation, saying that he expects multiple rate hikes in the future, and probably at an aggressive pace. Besides, Jerome Powell also revealed that there were strong majority in Fed committee wanted two or more rate hikes till the end of 2023. The reason behind was that they could not see the inflation coming down to the Fed’s 2% long term target until the year of 2025. Hence, the monetary policy is needed to be restrictive enough and sustained for a sufficiently long time.
Moreover, after the nation posted a few of upbeat economic data, the dollar index managed to extend its gains further. According to the Bureau of Economic Analysis, the US GDP came in at 2.0% for the first quarter of 2023, stronger than the consensus forecast at 1.4%. Besides, the number of American filed for unemployment claims has finally dropped after buoying at a high level for more than 3 weeks. According to the Department of Labor, US Initial Jobless Claims decreased from 265K to 239K this week, significantly lower than the consensus forecast at 266K, mirroring some sign of persistent labor market strength despite hefty rate hikes from the Federal Reserve.
Going forward, the announcement of the NFP would be the major event the investors are eyeing on as it could provide a clearer picture of the labor market current condition ahead of the next round of interest rate decision.
USD/JPY
The pair of USD/JPY extended its gains last week while closing its market price at 144.30. The pairing was supported by the strength of dollar index, where Federal Reserve’s Chairman hawkish stance continued to buoy the currency value. Besides, the ultra-easing monetary policy in Japan also further weighed on the Japanese Yen without any doubt.
EUR/USD
The pair of EUR/USD were traded flat throughout the week while ending the last trading session at 1.0910. Similarly, the pairing of EUR/USD received huge bearish pressures due to the strengths of dollar index. However, the EUR/USD steadily regained ground as Lagarde stressed rate hike outlook. Speaking at the central bank’s policy forum earlier, ECB President Christine Lagarde reiterated a hawkish view on interest rates, noting that unless there is a major change, the ECB will tighten rates again in July and policymakers are unlikely to “confidently declare that rates have peaked” any time soon.
GBP/USD
The pair of GBP/USD posted huge losses last week while ending last week’s session at the price of 1.2695. Britain’s economy got off to a sluggish start in 2023 as inflation eroded households’ disposable income, official figures showed on Friday. In details, the economy grew by just 0.1% in the first three months of the year, unchanged from a preliminary estimate by the Office for National Statistics (ONS). With that, it confirmed that the economy steered clear of a recession at the start of 2023. However, the market participants believe the UK economy is still at risk of recession as interest rates rise, despite easing inflation.
Market Review (Commodities): June 26 – June 30
GOLD
The gold price plummeted throughout the week while closing its market price at $1919.00 per troy ounce as hawkish comment from Jerome Powell and a slew of upbeat US economic data weighed on the gold prices. Earlier last week, Federal Reserve Chairman Jerome Powell, concluding two days of congressional testimony, reiterated his view that the United States is likely to raise interest rates at least two more times this year to curb high inflation. Besides, he once again stated his hawkish view in the ECB Economic Forum, saying that he expects multiple rate hikes in the future, and probably at an aggressive pace. Such a comment extinguished the sentiment in the gold market, prompted it to retouch the lowest level since March of this year.
CrudeOIL
Crude oil prices edged up slightly throughout the week and ended last week at $70.45 per barrel. Last week, the unexpected oil inventories drew surprised the market participants, which prompted the investors to rush into the oil market. According to the Energy Information Administration (EIA), the US oil inventories level had shed -9.603 million barrels in the week to 28th June. Besides, as the date of further voluntary oil cut by Saudi Arabia was getting closer, the market participants were betting the drop in global oil supply would further support the oil price. However, the gains of the oil prices were limited by the aggressiveness of rate hikes from the central banks.
Weekly Outlook: July 3 – July 7
For the week ahead, investors would continue to focus on crucial events such as Nonfarm Payroll this week in order to determine further direction. Besides that, the tensions between the US and China 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 the world’s largest oil consumer.
Highlighted economy data and events for the week: July 3 – 7
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 3rd July 2023 | |||||
| 09:45 | CNY | Caixin Manufacturing PMI (Jun) | – | 50.2 | 50.9 |
| 15:55 | EUR | German Manufacturing PMI (Jun) | – | 41.0 | 43.2 |
| 16:30 | GBP | Manufacturing PMI (Jun) | – | 46.2 | 47.1 |
| 22:00 | USD | ISM Manufacturing PMI (Jun) | – | 47.2 | 46.9 |
| Tuesday – 4th July 2023 | |||||
| 12:30 | AUD | RBA Interest Rate Decision (Jul) | – | 4.35% | 4.10% |
| 12:30 | AUD | RBA Rate Statement | – | – | – |
| Wednesday –5th July 2023 | |||||
| 09:45 | CNY | Caixin Services PMI (Jun) | – | – | 57.1 |
| 09:45 | CNY | Chinese Composite PMI | – | – | 55.6 |
| 15:50 | EUR | French Services PMI (Jun) | – | 48.0 | 52.5 |
| 15:55 | EUR | German Services PMI (Jun) | – | 54.1 | 57.2 |
| 16:00 | EUR | S&P Global Composite PMI (Jun) | – | 50.3 | 52.8 |
| 16:00 | EUR | Services PMI (Jun) | – | 52.4 | 55.1 |
| 16:30 | GBP | Composite PMI (Jun) | – | 52.8 | 54.0 |
| 16:30 | GBP | Services PMI (Jun) | – | 53.7 | 55.2 |
| Thursday – 6th July 2023 | |||||
| 02:00 | USD | FOMC Meeting Minutes | – | – | – |
| 04:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | -2.408M |
| 20:15 | USD | ADP Nonfarm Employment Change (Jun) | – | 236K | 278K |
| 20:30 | USD | Initial Jobless Claims | – | 245K | 239K |
| 21:45 | USD | Services PMI (Jun) | – | 54.1 | 54.9 |
| 22:00 | USD | ISM Non-Manufacturing PMI (Jun) | – | 50.5 | 50.3 |
| 22:00 | USD | JOLTs Job Openings (May) | – | – | 10.103M |
| 23:00 | CrudeOIL | Crude Oil Inventories | – | – | -9.603M |
| Friday – 7th July 2023 | |||||
| 20:30 | USD | Average Hourly Earnings (MoM) (Jun) | – | 0.3% | 0.3% |
| 20:30 | USD | Nonfarm Payrolls (Jun) | – | 200K | 339K |
| 20:30 | USD | Unemployment Rate (Jun) | – | 3.7% | 3.7% |
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