4 July 2022 Weekly Analysis
GCMAsia Weekly Report: July 4 – 8
Market Review (Forex): June 27 – July 1
US Dollar
The Dollar Index which traded against a basket of six major currencies received bullish momentum throughout the entire last week as the soaring of inflation risk continue paved the path for more aggressive rate hike to be happened in the upcoming Federal Reserve meeting. However, a number of downbeat data limited the gains of dollar index, while other regions reported positive data. As of last Friday, the market closed at 104.80.
On the monetary policy front, the Federal Reserve remained its hawkish tone where the policymakers vowed for further rapid rate hike in July meeting in order to bring down the spiking inflation risk. In this juncture, the US economy is experiencing the highest inflation risk in the history where the goods and services prices has been soaring significantly since the recovery from the outbreak of Covid-19 pandemic. In order to cool down the overheat economy, it is almost unavoidable for US to face the most awful stage of economy, which is the recession phase, as the US central bank were to increase the interest rate despite the economic growth and labor market are not align with the strong inflationary pressures. The vows of rate hike continued to spur the dollar index, where the currency managed to regain its bullish momentum and hit the two months highest level again in the past week.
However, the gains of the currency were limited by downbeat data. Over the past one week, the US has unleashed a series of downbeat data, including US Core PCE Price Index and ISM Manufacturing PMI. According to Bureau of Economic Analysis, the US Core PCE Price Index MoM for May came in at the reading of 0.3%, missing the market expectation of 0.4%. The Core PCE Price Index was used to determine the changes in the price of goods and services purchased by consumers for the purpose of consumption, which excluding food and energy. The lower-than-expected reading indicated that the inflation started to slow down, which reducing the odds of rate hike from Federal Reserve. Besides, the weaker-than-expected manufacturing PMI data has exerted further bearish pressures on the currency. Going forward, the eyes of the market participant would be focused on the crucial labor data, such as NFP.
USD/JPY
The pair of USD/JPY seesawed last week while closing its market price at 135.00. The massive bearish momentum has been noticed on the USD/JPY pair as traders took profit after the pair had been soaring during the early of the week, prompting the value of the pair slumped and closed the market at a one week low. Prior to that, the Japanese Yen experienced big fall as the Bank of Japan maintained its ultra-low interest rates and stressed its resolve to support a fragile economy with massive stimulus, an obvious move that showed a policy divergence with the rest of the world.
EUR/USD
The pair of EUR/USD slumped last week while closing its market price at 1.0435. The euro currency reversed its gains as the likelihood of ECB rate hikes has been digested by the market participants, where the official rates would be adjusted upward in the upcoming two meetings. At the same time, the ECB President Christine Lagarde provided no fresh insight or clue regarding to the central bank’s policy outlook in her speeches during the past week, leaving the market participants have divided expectation of rate hike magnitudes. Nonetheless, the pair of EUR/USD managed to rebounded during the last trading session of the day as Eurozone CPI showed that the market is experiencing sky high inflationary pressures.
GBP/USD
The pair of GBP/USD depreciated last week while ending last week session at the price of 1.2095. Throughout the past one week, the pair of GBP/USD slumped as the dollar index continues strengthened, while UK unleashed some data, which mostly in line with the market expectation. Early last week, the hawkish tone from the Federal Reserve members regarding the policy outlook dragged down the appeal of the currency pair. Then, the weaker-than-expected Manufacturing PMI data from the UK has further increased the market bets against the likelihood of economic downturn could be just around the corner in the United Kingdom. Going ahead, the attention of the market would continue to put on the upcoming economic data to gauge the currency movement in the future.
Market Review (Commodities): June 27 – July 1
GOLD
Gold price depreciated last week while closing its market price at $1810.00 per troy ounce. Gold price received bearish momentum last week following the strengthening US Dollar. Against the backdrop of rate hike cycle, the dollar index continued to soar while the value of the yellow metal slumped. As the US economy is still surrounded by the high inflationary pressure, rate hike is considered as a ‘must’ tool for the Federal Reserve to bring down the overheat economy. Hence, the outlook of the yellow metal remains clouded as of now.
CrudeOIL
Crude oil price eased while ending last week session at the price of $107.95 per barrel. Over the week, the crude oil price slumped after US Energy Information Administration (EIA) reported some stockpiles in gasoline and distillates. Shifting the focus to the OPEC+ meeting, the members of OPEC+ agreed to stick to a planned output increase in August, where no further oil pumps would be seen to cool the red-hot crude prices. As a result, the OPEC+ will increase the oil production in overall by 648,000 barrels per day. Despite, the oil price did not dive significantly as the oil production capacity of certain country such as Saudi Arabia and UAE are close the maximum level, where in fact, it is impossible for them to raise the oil production further.
Weekly Outlook: July 4 – 8
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: July 4 – 8
Time | Market | Event | Actual | Forecast | Previous |
Monday – 4th July 2022 | |||||
N/A | |||||
Tuesday – 5th July 2022 | |||||
09:30 | AUD | Retail Sales (MoM) | – | – | 0.9% |
12:30 | AUD | RBA Interest Rate Decision (Jul) | – | 1.35% | 0.85% |
12:30 | AUD | RBA Rate Statement | – | – | – |
16:30 | GBP | Composite PMI (Jun) | – | 53.1 | 53.1 |
16:30 | GBP | Services PMI (Jun) | – | 53.4 | 53.4 |
18:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
Wednesday – 6th July 2022 | |||||
16:30 | GBP | Construction PMI (Jun) | – | 55.0 | 56.4 |
22:00 | USD | ISM Non-Manufacturing PMI (Jun) | – | 54.5 | 55.9 |
22:00 | USD | JOLTs Job Openings (May) | – | 11.050M | 11.400M |
Thursday – 7th July 2022 | |||||
02:00 | USD | FOMC Meeting Minutes | – | – | – |
04:30 | USD | API Weekly Crude Oil Stock | – | – | -3.799M |
19:30 | EUR | ECB Publishes Account of Monetary Policy Meeting | – | – | – |
20:30 | USD | Initial Jobless Claims | – | 230K | 231K |
22:00 | CAD | Ivey PMI (Jun) | – | – | 72.0 |
23:00 | USD | Crude Oil Inventories | – | -0.569M | -2.762M |
Friday – 8th July 2022 | |||||
19:55 | EUR | ECB President Lagarde Speaks | – | – | – |
20:30 | USD | Nonfarm Payrolls (Jun) | – | 270K | 390K |
20:30 | USD | Unemployment Rate (Jun) | – | 3.6% | 3.6% |
20:30 | CAD | Employment Change (Jun) | – | 22.5K | 39.8K |