5 December 2022 Weekly Analysis
GCMAsia Weekly Report: December 5 – 9
Market Review (Forex): November 28 – December 2
US Dollar
The Dollar Index which traded against a basket of six major currencies received significant bearish momentum last week following the expectation of easing rate hike path of Fed, which prompting investors to shift their capitals toward other assets. The Dollar Index has closed its market price at 104.34.
Last week, the Dollar Index slumped amid the background of dovish statement from Fed. According to Reuters, the Federal Reserve Chairman Jerome Powell appeared a speech on Thursday that the aggressive rate hike pace could be slowed, and it may come as soon as the December meeting. In addition, he also acknowledged that the current size of rate hikes were approaching “the level of restraint that will be sufficient to bring inflation down”, which further increased the odds of softer rate hike in the next meeting. Besides, the US Core PCE Price Index MoM that excluding the food and energy consumption notched down from the previous reading of 0.5% to 0.2%, missing the consensus forecast of 0.3%. The lower-than-expected PCE figures add to signs that US inflation is falling, and the possibility of aggressive rate hike was further decreased.
Nonetheless, the losses of Dollar Index was limited following the upbeat economic data. A series of economic data such as Nonfarm Payrolls, Gross Domestic Product (GDP), JOLTs Job Openings and Pending Home Sales has given a better-than-forecast reading, which complicating the Fed’s aim at getting the inflation back to 2% as the optimistic economy outlook may lead the hefty rate hike plan to continue.
USD/JPY
The pair of USD/JPY extended its losses last week while closing its market price at 134.37. The pairing received bearish momentum following the slump of US Dollar. As the Fed Chairman had supported a smaller rate hike in the December meeting, it prompted investors to flee away from the US currency market.
EUR/USD
The pair of EUR/USD appreciated last week while closing its market price at 1.0541. The Euro received bullish momentum as the possibility of hefty rate hike from Fed in the next meeting was reduce, which prompted investors looking for other assets which having better prospects such as Euro. In addition, the EURUSD extended its gains over the hawkish statement from European Central Bank (ECB). Last week, ECB President Christine Lagarde claimed that the inflation risk in Eurozone has not reached its peak, which hinted that the ECB may follow the Fed’s previous policy of aggressively raising interest rates to curb double-digit inflationary risk. Nonetheless, the gains of Euro was limited following the easing of inflation rate in Eurozone. According to the statistical office of the European Union, the Eurozone Consumer Price Index (CPI) YoY are down from 10.6% to 10.0%, missing the economist forecast of 10.4%. With that, the less aggressive tightening monetary policy might be implemented.
GBP/USD
The pair of GBP/USD surged last week while ending last week session at the price of 1.2287. The Pound received bullish momentum last week over the dovish statement from Fed, which dragged down the appeal of US Dollar. On the other hand, the gains of Pound Sterling was extended amid the upbeat economic data. According to Markit/CIPS, the UK Manufacturing Purchasing Managers Index (PMI) for November notched up from the previous reading of 46.2 to 46.5. Though, it was noteworthy that the figure that below than 50 was indicating a contraction in manufacturing sector.
Market Review (Commodities): November 28 – December 2
GOLD
Gold price rose significantly last week while closing its market price at $1798.13 per troy ounces. Gold price received bullish momentum last week over the depreciation of US Dollar upon reducing odds of aggressive rate hike path. As the essential inflationary data — CPI and PCE data had shown that the inflation risk in the US had lowered, investors started anticipating that the lower rate hike would likely to be implemented in the December meeting, says 50 basis point. Thus, it sparked the appeal of gold.
CrudeOIL
Crude oil price rallied while ending last week session at the price of $81.00 per barrel. Crude oil price received bullish momentum last week following China cities started to ease its covid-19 lockdown. Last week, Guangzhou and Chongqing decided to loosen the lockdown, although the Covid-19 cases in China still spiking. The loosening lockdown would likely to boost economy activities in China, which stimulating the demand of this black commodity. Besides, the decreasing of crude oil inventories had also boost up the oil price. According to EIA, the US Crude Oil Inventories dropped by -12.580M barrels, more than the market forecast for a decrease of -2.758 million barrels. However, the gains of oil price was limited over the European Union countries had agreed to a price cap of $60 per barrel on Russian oil exports to punish Moscow over its war against Ukraine. Crude traders had initially feared that EU countries might go for a much smaller limit of $50 a barrel or below that could sufficiently anger President Vladimir Putin and prompt him to carry out his threat of slashing Russian oil production or exports to punish Europe instead over the move. But by moving up the cap, Europe may avert any Russian retaliation — keeping Moscow’s oil supplies to the region flowing and crude prices lower.
Weekly Outlook: December 5 – 9
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims and RBA Interest Rate Decision 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: December 5 – 9
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 5th December 2022 | |||||
| 9:45 | EUR | ECB President Lagarde Speaks | – | – | – |
| 17:30 | GBP | Composite PMI (Nov) | – | 48.3 | 48.3 |
| 17:30 | GBP | Services PMI (Nov) | – | 48.8 | 48.8 |
| 23:00 | USD | ISM Non-Manufacturing PMI (Nov) | – | 53.1 | 54.4 |
| Tuesday – 6th December 2022 | |||||
| 11:30 | AUD | RBA Interest Rate Decision (Dec) | – | 3.10% | 2.85% |
| 11:30 | AUD | RBA Rate Statement | – | – | – |
| 17:30 | GBP | Construction PMI (Nov) | – | 52 | 53.2 |
| 23:00 | CAD | Ivey PMI (Nov) | – | 51 | 50.1 |
| 23:30 | AUD | RBA Rate Statement | – | – | – |
| Wednesday – 7th December 2022 | |||||
| 1:00 | USD | EIA Short-Term Energy Outlook | – | – | – |
| 5:30 | USD | API Weekly Crude Oil Stock | – | – | -7.850M |
| 8:30 | AUD | GDP (QoQ) (Q3) | – | 0.70% | 0.90% |
| 23:00 | CAD | BoC Interest Rate Decision | – | 4.25% | 3.75% |
| 23:30 | USD | Crude Oil Inventories | – | -2.758M | -12.580M |
| Thursday – 8th December 2022 | |||||
| 7:50 | JPY | GDP (QoQ) (Q3) | – | -0.30% | -0.30% |
| 20:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 21:30 | USD | Initial Jobless Claims | – | 230K | 225K |
| Friday – 9th December 2022 | |||||
| 2:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 21:30 | USD | PPI (MoM) (Nov) | – | 0.20% | 0.20% |
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