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04 October 2021                                Weekly Analysis

 

GCMAsia Weekly Report: October 4 – 8

Market Review (Forex): September 27 – October 1

US Dollar

The dollar index which traded against a basket of six major currency pairs surged significantly last week over the backdrop of bullish economic data from United States last week as well as hawkish tone from the Federal Reserve, which dialed up the market optimism toward the economic progression in the United States. The Dollar Index was closing its price on last Friday session at the price of 93.40.

 

Last week, the overall trend for the US Dollar remained bullish, bolstered by the rising US Treasury yield amid market participants speculated the Federal Reserve have higher possibility to reduces its bond buying program in November and tighten the monetary policy in order to combat high inflation risk in future. Recently, the tone from the U.S. Central Bank had turned hawkish during the monetary policy meeting, reinforcing the market view for a sooner-than-expected contractionary monetary policy. According to Reuters, St. Louis Fed James Bullard claimed that he expected the inflation rate rise to 2.8% through next year, well above the central bank’s 2% target. Besides, he also believed the Fed will begin tapering in November to maintain the inflation stability. Besides that, Cleveland Fed President Loretta Mester claimed that she hopes the Fed to start tapering in November and end by next June. In addition, she also reiterated that she speculated the first interest rate hike coming by the end of 2022. The US Treasury yields rose as investors continued to digest the likelihood that the Federal Reserve will contract their quantitative easing program soon. On the economic data front, the US Dollar received further bullish momentum following upbeat economic data were released last week. According to Bureau of Economic Analysis, U.S. Gross Domestic Product (GDP) for last quarter increased from the previous reading of 6.6% to 6.7%, exceeding the market forecast at 6.6%. Meanwhile, Institute for Supply Management reported that U.S. ISM Manufacturing Purchasing Managers Index (PMI) increased from the previous reading of 59.9 to 61.1, exceeding the market forecast at 59.6.

 

The overall bullish for the US Dollar last week was mainly due to the rising US Treasury yield with the expectation of upbeat economic outlook as well as hawkish tone from the Federal Reserve. Nonetheless, investors would be suggested to continue to scrutinize the latest updates with regards of further crucial economic data and also monetary policy decision to receive further trading signal.

 

USD/JPY

The pair of USD/JPY received bearish momentum on last week while ending last Friday session at the price of 110.95. The overall bearish momentum for the pair of USD/JPY last week was mainly due to the appreciation of Japanese Yen. The Japanese Yen received significant bullish momentum over the backdrop of upbeat economic data from Japan region last week. According to Bank of Japan, Japan Tankan Large Manufacturers Index increased significantly from the previous reading of 14 to 18, exceeding the market forecast at 13, which spurring positive prospect for the economic momentum in Japan.

 

EUR/USD

The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.1595. The overall bearish momentum for the pair of EUR/USD last week was mainly due to the appreciation of the US Dollar. Nonetheless, due to lack of catalyst for the European market, the overall trend for the Euro remained subdued. Investors would continue to scrutinize the latest updates with regards of future economic data to receive further trading signal.

 

GBP/USD

The pair of GBP/USD had slumped last week while closing its market price at 1.3550. The Pound Sterling slumped significantly over the backdrop of bearish tone from the Bank of England last week. According to Reuters, Bank of England Governor Andrew Bailey claimed that he expected the U.K. economy to recover its pre-pandemic level of output early next year, later than the central bank prediction last month. His new forecast had spurred concerns that the U.K. economy recovery has slowed by more than expected amid spiking numbers of Covid-19 cases in U.K. continue to weigh down the economic momentum. Besides, high inflation rate due to widespread of supply chain disruption including the panic-buying of petrol over last week continue to dial down the market optimism toward the economic progression. Nonetheless, investors would continue to scrutinize the latest updates with regards of crucial economic data as well as Covid-19 development in order to gauge the likelihood movement for the currency.

 

Market Review (Commodities): September 27 – October 1

GOLD

Gold price have surged last week with the price of $1765.10 per troy ounce amid technical correction following it reached its recent low. Despite that, the overall momentum for the gold remained weak as market participants fears the Federal Reserve might start to taper its monetary policy to combat the high inflation risk in future. Contractionary monetary policy would reduce the money circulation in the global financial market, which diminishing the inflation risk in future and dragging down the appeal for the safe-haven gold. Nonetheless, the overall statement from the Federal Reserve as for now remained vague, hence investors would continue to scrutinize the latest updates with regards of future monetary policy to receive further trading signal.

 

CrudeOIL

The price of crude oil surged significantly last week while closing last Friday session with the price of $75.65. The oil market maintained its bullish trend, supported by favorable demand outlooks following the rapid Covid-19 vaccination program around the world. Nonetheless, the gains experienced by this black commodity was limited over the backdrop of downbeat inventory data. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories notched up significantly from the previous reading of -3.481M to 4.578M, missing the market forecast at -1.652M.

 

Weekly Outlook: October 4 – 8

For the week ahead, investors would continue to focus on crucial economic data such as the 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: October 4 – 8

Time Market Event Actual Forecast Previous
Monday – 4th October 2021
N/A
Tuesday – 5th October 2021
08:30   AUD Retail Sales (MoM) -1.70%
11:30   AUD RBA Interest Rate Decision (Oct) 0.10% 0.10%
11:30   AUD RBA Rate Statement
16:30   GBP Composite PMI (Sep) 54.1 54.1
16:30   GBP Services PMI (Sep) 54.6 54.6
22:00   USD ISM Non-Manufacturing PMI (Sep) 60 61.7
Wednesday – 6th October 2021
09:00   NZD RBNZ Interest Rate Decision 0.50% 0.25%
16:30   GBP Construction PMI (Sep) 55 55.2
20:15   USD ADP Nonfarm Employment Change (Sep) 430K 374K
22:30   USD Crude Oil Inventories 4.578M
Thursday – 7th October 2021
19:30   EUR ECB Publishes Account of Monetary Policy Meeting
20:30   USD Initial Jobless Claims 350K 362K
22:00   CAD Ivey PMI (Sep) 66
Friday – 8th October 2021
20:30   USD Nonfarm Payrolls (Sep) 460K 235K
20:30   USD Unemployment Rate (Sep) 5.10% 5.20%
20:30   CAD Employment Change (Sep) 60.0K 90.2K