07 February 2022 Weekly Analysis
GCMAsia Weekly Report: February 7 – 11
Market Review (Forex): January 31 – February 4
US Dollar
The dollar index which traded against a basket of six major currencies made its advancement, bouncing back after suffered losses from multiple significant past week events. On Wednesday, Google and Amazon stock soared after releasing record revenue and strong earnings, encouraging investors to have bigger risk appetite to involve in risky assets, thus causing a drop in the dollar.
The dollar bounced back on Friday, after data showed the world’s largest economy created far more jobs than expected, raising the chances of a larger Federal Reserve interest rate increase at the March policy meeting. The data of U.S. Nonfarm Payrolls drove the index higher, with an actual data of 467,000 jobs printed, higher compared to 150,000 jobs of forecasted data by Reuters. It changed the sentiment in dollar after ADP Nonfarm employment data disappointed market participants last week. Besides, the dollar also tracked the surge in U.S. Treasury yields. Both U.S. two-year and five-year yields, rose to 1.2970% and 1.79% respectively. With this, higher interest rate expectations are reflected among the investors.
Nonetheless, the overall market movement remain positive with the help of good results from U.S. Nonfarm payroll as well as strong rate hike expectations from treasury yields surge. As for now, investors would continue to keep an eye out on the crucial economic events such as the upcoming CPI and Fed Monetary Policy Report in order to gauge the likelihood movement for the US Dolla. As of writing, the dollar index was traded at the price of 95.64.
USD/JPY
The pair of USD/JPY received bullish on last week amid appreciation of Japanese Yen while ending last Friday session at the price of 115.35. The overall bullish momentum for the USD/JPY was mainly due to the depreciation of the Japanese Yen. The Yen received significant selling pressures last week amid bullish job report as well as earnings report from major companies in United States had increased the risk appetite in the global financial market last week, diminishing the appeal for the safe-haven Yen.
EUR/USD
The pair of EUR/USD surged throughout the week while ending last week session at the price of 1.1462. The overall momentum for the Euro remained bullish over the backdrop of hawkish tone from the European Central Bank last week. According to Reuters, the ECB finally acknowledged mounting inflation risk would be lasted in long-term basis while signaling the possibility of implementing contractionary monetary policy this year in order to combat the high inflation risk. The Eurozone inflation hit record levels for third month in a row, jeopardizing the growth in consumer spending while increasing the probability for ECB to raise their interest rate. Nonetheless, market participants will continue to observe if there is any shift in ECB’s outlook to receive further trading signal.
GBP/USD
The pair of GBP/USD appreciated last week while closing its market price at 1.3535. Pound Sterling received bullish momentum last week following the Bank of England increased their interest rate during its monetary policy meeting last week. By a majority of five to four, the Monetary Policy Committee (MPC) had voted to increase the cost of borrowing from 0.25% to 0.5%. Market participants are now expecting the BoE to increase their interest rates to at least 1% by May and 1.5% by November to stabilize the inflation risk. Besides, the Bank of England also decided to reduce their earlier £875bn bond purchasing program in order to enhance the contractionary monetary policy. Rising interest rate as well as diminishing bond purchasing program would likely to decrease the money circulation in the financial market, increasing the appeal for the Pound Sterling.
Market Review (Commodities): January 31 – February 4
GOLD
Gold price was traded flat last week with the price of $1835.55 per troy ounce ahead of Federal Reserve meeting for further confirmation on its interest rate hike path. As for now, market participants speculated the Fed will start to tighten monetary policy at a much faster pace than thought a month ago to combat persistently high inflation rate. Besides, the upbeat Nonfarm Payroll jobs data from United States last week also spurred positive prospect toward the economic momentum in the United States, raising the rate hike expectation from Fed while prompting the US Treasury Yield surged to record high. Nonetheless, investors would likely to continue to scrutinize the crucial updates with regard of rate hike decision from Fed in order to receive further trading signal.
CrudeOIL
The price of crude oil surged last week while closing last Friday session with the price of $91.55 per barrel. The crude oil price extends its gains amid the massive winter storm across the central and Northeast United States on last week was threatening to further oil supply disruption in future, while OPEC and its allies continued to struggle to raise their output due to lack of capacity. In addition, the crude oil price extends its gains over the backdrop of bullish inventory data last week. According to Energy Information Administration (EIA), US Crude Oil Inventories notched down from the previous reading of 2.377M to -1.046M, better than the market forecast at 1.525M.
Weekly Outlook: February 7 – 11
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims and inflation data this week 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: February 7 – 11
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 7th February 2022 | |||||
| 8:30 | AUD | Retail Sales (MoM) (Jan) | – | – | -4.40% |
| Tuesday – 8th February 2022 | |||||
| N/A | |||||
| Wednesday – 9th February 2022 | |||||
| 23:30 | USD | Crude Oil Inventories | – | 1.525M | -1.046M |
| Thursday – 10th February 2022 | |||||
| 21:30 | USD | Core CPI (MoM) (Jan) | – | 0.50% | 0.60% |
| 21:30 | USD | Initial Jobless Claims | – | 228K | 238K |
| Friday – 11st February 2022 | |||||
| 4:15 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 15:00 | GBP | GDP (YoY) (Q4) | – | 6.50% | 6.80% |
| 15:00 | GBP | Manufacturing Production (MoM) (Dec) | – | 0.20% | 1.10% |