7 June 2021 Weekly Analysis
GCMAsia Weekly Report: June 7 – 11
Market Review (Forex): May 31 – June 4
US Dollar
The dollar index which traded against a basket of six major currency pairs was traded within a lower boundary over the backdrop of bearish economic data on last week while market participants speculate that the Federal Reserve would continue to implement expansionary monetary policy in order to boost up the economic momentum in the United States. The Dollar Index was closing its price on last Friday at the price of 90.07.
On the economic data front, most of the crucial economic data from U.S. region came in at bleak reading on last week. According to Bureau of Economic Analysis, U.S. Gross Domestic Product (GDP) for last quarter came in at only 6.4%, missing the market forecast at 6.5%. Besides, Bureau of Labor Statistics report that U.S. Nonfarm Payrolls came in at only 559k, missing the market forecast at 650K, which dialed down the market optimism toward the economic progression in United States. Worse-than expectation data means there is no urgency for Federal Reserve to tamper its monthly purchase of $120 billion in bonds to support economy, which diminishing the appeal of the US Dollar. Nonetheless, investors would focus on the U.S. inflation data in future to gauge the likelihood movement for the currency. A jump in prices could be prompting the Federal Reserve to be tightening its monetary policy plan to combat the inflation risk.
On the other hand, the US Dollar received further bearish momentum amid the rising tensions between U.S. and China relation had also diminished market demand on the US Dollar. According to ALJAZEERA, U.S. President Joe Biden signed an order Thursday amending a ban on U.S. investment in Chinese companies begun under his predecessor, which affecting 59 firms with ties to China’s military or surveillance industry, including Huawei Technologies. Co. On top of that, investors now would also be suggested to focus on US-China trade issues to receive further trading signal for US Dollar.
USD/JPY
The pair of USD/JPY received bearish momentum on last week while ending last Friday session at the price of 109.50. The overall trend for Japanese Yen remained bearish on last week amid the concerns over the resurgence of Covid-19 cases from Japan region had significantly diminished the appeal of the Japanese Yen. Besides, Investors remained pessimistic toward the economic progress in Japan over the bearish employment data, falling consumer prices and government’s emergency in Tokyo and other areas due to Covid-19 pandemic. According to Reuters, hospitals in Japan’s second largest city of Osaka are now buckling under a huge wave of new Covid-19 infections, running out of beds and ventilators as exhausted doctors war of a “system collapse”.
EUR/USD
The pair of EUR/USD surged throughout the week while ending last week session at the price of 1.2180. The overall bullish momentum for the pair of EUR/USD was mainly due to depreciation of US Dollar. Besides that, the Euro received further bullish momentum over the backdrop of the upbeat economic data from the European region. According to Markit Economics, Eurozone Markit Composite Purchasing Managers Index (PMI) and European Services Purchasing Managers Index (PMI) came in at 57.1 and 55.2, which both fared better than market expectation at 56.9 and 55.1 respectively.
GBP/USD
The pair of GBP/USD was surged on last week while closing its market price at 1.4155. The overall trend for the pair of GBP/USD remained bullish on last week amid positive prospect economic for the United Kingdom over the backdrop of the string of upbeat economic data as well as fast-pace Covid-19 vaccination program. According to Markit Economics, U.K. Composite Purchasing Managers’ Index (PMI) notched up significantly from the preliminary reading of 62.0 to 62.9, confounding for the reading up to 62.0. Meanwhile, U.K. Services Purchasing Managers Index (PMI) came in at 62.9, which also better than market forecast at 61.8.
Market Review (Commodities): May 31- June 4
GOLD
Gold price surged tremendously throughout last week with the price of $1880.00 per troy ounce amid the hopes upon the massive economic stimulus plan from the United States and also expansionary monetary policy from Fed had spurred higher probability of inflation risk in future, which insinuating the market demand for the safe-haven commodity. Higher inflation would normally tend to reduce the value of currency. Hence, when inflation remains high over a longer period, gold had become an effective tool in order to hedge against the inflationary condition. On the other hand, the gold market received further bullish momentum amid downbeat job data from Unites States on last week, which spurring risk-off sentiment in the FX market while increasing market demand on the safe-haven commodity.
CrudeOIL
The price of crude oil surged significantly last week while closing last Friday session with the price of $69.35 per barrel over the backdrop of bullish inventory data and positive prospect for the crude oil demand. According to Energy Information Administration (EIA), the U.S. Crude Oil Inventories had notched down significantly from the previous reading of -1.662M to -5.080M, better than the market forecast at -2.443M. Besides, the oil market edged higher on expectation for growing oil demand during the summer driving season in United States. Tracking Service GasBuddy claimed that the U.S. gasoline demand, coinciding with the Memorial Day weekend, had increased 9.6% above the average of the previous weekend.
Weekly Outlook: June 7 – 11
For the week ahead, investors would continue to focus on crucial economic data such as Core CPI from United States and Covid-19 development in order to determine further direction. Besides that, the ongoing situation with higher inflation risk 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: June 7 – 11
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 7th June 2021 | |||||
| N/A | |||||
| Tuesday – 8th June 2021 | |||||
| 07:50 | JPY | GDP (QoQ) (Q1) | – | -1.2% | -1.3% |
| 17:00 | EUR | German ZEW Economic Sentiment (Jun) | – | 85.3 | 84.4 |
| 22:00 | USD | JOLTs Job Openings (Apr) | – | – | 8.123M |
| Wednesday – 9th June 2021 | |||||
| 22:00 | CAD | BoC Interest Rate Decision | – | 0.25% | 0.25% |
| 22:30 | CrudeOIL | Crude Oil Inventories | – | – | -5.080M |
| Tentative | CAD | BoC Press Conference | – | – | – |
| Thursday – 10th June 2021 | |||||
| 19:45 | EUR | ECB Interest Rate Decision (Jun) | – | 0.00 | 0.00% |
| 20:30 | USD | Core CPI (MoM) (May) | – | 0.4% | 0.9% |
| 20:30 | USD | Initial Jobless Claims | – | 371K | 385K |
| 20:30 | EUR | ECB Press Conference | – | – | – |
| Friday – 11th June 2021 | |||||
| 14:00 | GBP | Manufacturing Production (MoM) (Apr) | – | 1.5% | 2.1% |