5 July 2021 Weekly Analysis
GCMAsia Weekly Report: July 5 – July 9
Market Review (Forex): June 28 – July 2
US Dollar
The dollar index which traded against a basket of six major currency pairs was mostly traded higher throughout the entire week before gave up some of its gains on the end of last week trading session at the price of 92.19. Follow positive data and continuous hawkish stance from Fed and its members, market participant remains optimistic on U.S economy and potential policy tightening from Fed, thus continue to place bullish bets on the greenback.
On data front, U.S consumer confidence figures have impressed the market on Tuesday where CB Consumer Confidence Index data jumped to a 16-month high in June with the reading of 127.3 against 119.0 expectation. Besides that, ADP Non-Farm Employment Change data also pointed another sharp jump in hiring for June with the reading of 692K against 600K expectation. Pending Home Sales also improved significantly with the reading of 8.0% against -0.8% expectation while Initial Jobless Claims further support the momentum with the reading of 364K against 390K. However, key stats on Friday such as Non-Farm Payroll and Unemployment Rate provide a rather mixed view. Non-Farm payroll surpassed market expectation of 700K to 850K, but unemployment rate rose to 5.9% from 5.8% in May.
Despite that, the overall report was strong and analyst stated that it should cement the case for Fed to start tapering its asset purchases in the near future. After a surprise Fed meeting on June 16, several Fed members have called for interest rate hike as early as late 2022 as inflation is expected to continue rising for the medium term. According to Fed Member Robert Kaplan, he recently noted that they need to start tightening monetary policy to ensure a smooth transition. Kaplan also that the economic recovery in the US is expected to continue its momentum and it is desirable to act earlier the economic recovery is in line with current monetary policy settings.
USD/JPY
The pair of USD/JPY was mostly traded higher last week before gave up some gains at the end of the market, closing with the price of 111.00. Mainly, the overall bullish momentum was due to strength of U.S dollar which is supported by recent Fed hawkish surprise. Besides that, coronavirus situation in Japan remains a major concern. According to data, the Japanese capital, Tokyo is witnessing a surge in cases of the Delta variant of the coronavirus – a situation described by one government adviser as “very, very worrying”.
EUR/USD
The pair of EUR/USD have plunged throughout the week while ending last Friday session at the price of 1.1863. Overall, the weakness in Euro was largely due to the strength of the U.S dollar. Despite with key stats German such as German Unemployment Change and German Manufacturing PMI were tilted to the positive, it was not enough to offset the pressure triggered by recent U.S Fed meeting.
GBP/USD
The pair of GBP/USD have fell on last week while closing its market price at 1.3832 on the backdrop of Delta variant coronavirus and weak data. According to the latest data from Public Health England, the number of confirmed or probable cases of the Delta variant in the UK have risen 46% in the space of a week from 111,157 to 161,981. Around 95% of new cases that are sequenced in the UK involved the variant. The rising cases have previously already delayed Boris Johnson plan’s to reopening UK economy to July 19 and potentially could change further if the situation persist. On top of that, weak data and dollar strength also triggered extra pressure. On data front, U.K GDP fell to -1.6% against market expectation of -1.5% while U.K Manufacturing PMI also dropped to 63.9, weaker than market expectation of 64.2.
Market Review (Commodities): June 28 – July 2
GOLD
Gold price remain traded in a range in overall throughout the week, but managed to recover some ground and ending the week with a profit at the price of 1787.39. The market are currently struggling to determine the direction of gold as conflicting them such as hawkish Fed and rising inflation leaving investors in confusion. Earlier on, the yellow metal experience a huge sell-off after speculation about stimulus tapering and rate hikes by the U.S. central bank with FOMC members commenting on the likelihood of taper and rate hike further fueled the speculation. However, rising inflation pressure in the U.S also help support demand for gold as a hedge against inflation. The Fed’s preferred inflation gauge, the Personal Consumption Expenditure Index, grew by a multi-year high of 3.4 percent in the 12 months to May. The more popular Consumer Price Index, meanwhile, jumped 5% in the year to May, its most since 2008. On top of that, rising Delta variant coronavirus also further increase demand for the gold a safe-haven which help limit the losses. For a clear direction, market will have to wait for more catalyst to attain further confirmation for the yellow metal.
CrudeOIL
The price of crude oil continues to extends its gains last week while closing last Friday session with the price of $75.01 per barrel on the backdrop of surging fuel demand, record decline in U.S crude oil stockpiles and OPEC. Following latest development, Re-openings in many U.S. states and the start of the summer driving season have sent gasoline consumption in recent weeks to the highest since the pandemic started. Domestic airline travel is also bouncing back, though passenger throughput at airports is still at some 80 percent of pre-pandemic days. Moreover, falling crude inventories also help provide support for the commodity. On data front, U.S crude oil inventories fell by -6.718M, better than market expectation of -4.686M. On top of that, the commodity also benefitted from OPEC struggle to reach consensus on plans to ease production curbs. On Friday, the OPEC meeting ended without a deal after the United Arab Emirates failed to go ahead with a preliminary agreement – to reportedly raise output by 400,000 barrels per day from August to December which is already struck by Saudi Arabia and Germany. The meeting will reconvene on Monday.
Weekly Outlook: July 5 – 9
For the week ahead, investors would continue to focus on crucial economic data such as FOMC Meeting Minutes 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. At the same time, investors will also eye on the results from OPEC meeting.
Highlighted economy data and events for the week: July 5 – July 9
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 5th July 2021 | |||||
| 16:30 | GBP | Composite PMI (Jun) | – | 61.7 | 61.7 |
| 16:30 | GBP | Services PMI (Jun) | – | 61.7 | 61.7 |
| Tuesday – 6th July 2021 | |||||
| 12:30 | AUD | RBA Interest Rate Decision (Jul) | – | 0.10% | 0.10% |
| 12:30 | AUD | RBA Rate Statement | – | – | – |
| 16:30 | GBP | Construction PMI (Jun) | – | 63.5 | 64.2 |
| 17:00 | EUR | German ZEW Economic Sentiment (Jul) | – | 75.4 | 79.8 |
| 22:00 | USD | ISM Non-Manufacturing PMI (Jun) | – | 63.5 | 64 |
| Wednesday – 7th July 2021 | |||||
| 22:00 | USD | JOLTs Job Openings (May) | – | 8.300M | 9.286M |
| 22:00 | CAD | Ivey PMI (Jun) | – | – | 64.7 |
| Thursday – 8th July 2021 | |||||
| 02:00 | USD | FOMC Meeting Minutes | – | – | – |
| 19:30 | EUR | ECB Monetary Policy Statement | – | – | – |
| 20:30 | USD | Initial Jobless Claims | 355K | 355K | 364K |
| 23:00 | USD | Crude Oil Inventories | – | – | -6.718M |
| Friday – 9th July 2021 | |||||
| 14:00 | GBP | GDP (MoM) | – | – | 2.30% |
| 14:00 | GBP | Manufacturing Production (MoM) (May) | – | 1.00% | -0.30% |
| 18:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 18:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 20:30 | CAD | Employment Change (Jun) | – | 175.0K | -68.0K |