8 August 2022 Weekly Analysis
GCMAsia Weekly Report: August 8 – 12
Market Review (Forex): August 1 – 5
US Dollar
The Dollar Index which traded against a basket of six major currencies received significant bullish momentum last week after the upbeat economic data had been released, which prompting investors to shift their capitals toward US Dollar. Though, the gains experienced by the US Dollar was limited following the market participants lowered the rate hike probability, according to FedWatch Tool. The Dollar Index has closed its market price at 106.43.
Last week, the US Dollar index extended its gains following the upbeat Nonfarm Payfolls data has been announced. According to Bureau of Labor Statistics, the US Nonfarm Payrolls for July notched up from the previous reading of 398K to 528K, exceeding the market forecast of 250K. Aside from the crucial data from the United States, there are also other upbeat economic data were released by last week. The US PCE Price Index for the month of June came in at 6.8% as widely expected, while higher than the prior month’s reading of 6.3%. Besides, another inflation gauge which excluding food and energy, the Core PCE data also increased by 0.6%, recording its biggest gain since a year ago. Furthermore, the Dollar Index received further bullish momentum amid the hawkish statement from Fed members. According to the statement from San Francisco Fed President Mary Daly, she emphasized that the US central bank still has a long way to cool the overheating economy back to normal, implying higher interest rates in the future. She also vowed that investors should not interpret the recent big interest rate as an indication of the end of rate hikes, whereby the tightening path will still be continued. On the other side, the Chicago Fed President Charles Evans has also claimed that the size of rate hike which scheduled on 22 September are still on the table.
Nonetheless, the gains experienced by US Dollar was limited which over the easing possibility of forcefully rate hikes from the US central Bank in the earlier week. According to the Fed Rate Monitor Tool, the likelihood of a 50-basis point interest rate upward adjustment is roughly about 93%, while the possibility of 75-basis point rate hike is just about 7.0%. On the economic data front, the US Initial Jobless Claims notched up from the previous reading of 254K to 260K, exceeding the consensus forecast of 259K, according to the US Department of Labor. The rising of jobless claims data indicated the softening in the labor market, which brought negative prospects for economic progression in the US.
USD/JPY
The pair of USD/JPY extended its gains last week while closing its market price at 134.99. The pair of USD/JPY received bullish momentum as investors still speculated the Bank of Japan (BoJ) would likely to maintain its dovish tone in order to stabilize the economic momentum. According to Reuters, the BoJ remains one of the few global central banks to maintain a dovish stance while others have adopted tightening policies of hiking interest rates to combat inflation. It would likely to stoke a shift market sentiment toward other currencies which having better prospects such as US Dollar, as BoJ continue to remain its loosing monetary policy would drag down the risk-off return of investors in Japan.
EUR/USD
The pair of EUR/USD slumped last week while closing its market price at 1.0182. The Euro received bearish momentum following negative economic data were released. The Germany Unemployment Change for July came in at the reading of 48K, which higher than the consensus forecast of 15K. Besides that, the Germany Gross Domestic Product (GDP) QoQ in second quarter notched down from the previous reading of 0.8% to 0.0%, missing the 0.1% as widely expected. The Germany Manufacturing Purchasing Managers Index (PMI) for July had also given a pessimistic reading which lower than 50. The reading which lower than 50 indicated that the contraction in Germany manufacturing sector, which spurred bearish momentum on the Euro. However, the upbeat CPI data in Eurozone had limited the losses of Euro. According to Eurostat, the Eurozone Consumer Price Index (CPI) YoY posted at the reading of 8.9%, exceeding the market expectation of 8.6%. The higher-than-expected CPI data showed that the soaring inflation risk keep lingering in the European, which increasing the odds of rate hikes from European Central Bank (ECB) in order to tamp down rising prices.
GBP/USD
The pair of GBP/USD depreciated last week while ending last week session at the price of 1.2072. The Pound received bearish momentum last week following the passive economic data. The UK Manufacturing Purchasing Managers Index (PMI) for July notched down from the previous reading of 52.8 to 52.1, missing the consensus forecast of 52.2. In addition, the UK Services Purchasing Managers Index (PMI) and UK Composite Purchasing Managers’ Index (PMI) had also showed a lower-than-expected reading, which dialed down the market optimism further for the United Kingdom. On the other hand, Pound Sterling extended its losses although BoE had raised its interest rate from 1.25% to 1.75%, which is the most since 1995 as a pessimistic statement has been given by the members of BoE. The MPC projects UK to enter into a recession in the 4th quarter of 2022, while expecting it will last for 5 quarters, the longest recession since the global financial crisis. Besides, the BoE also emphasized that the latest surge in gas prices will also further exacerbate the dire outlook for activity in the UK.
Market Review (Commodities): August 1 – 5
GOLD
Gold price appreciated last week while closing its market price at $1774.10 per troy ounces. Gold price received bullish momentum last week amid the heightening of geopolitical tensions between the US and China. Pelosi visited Taiwan and met President Tsai Ing-wen on August 3, and she ignoring weeks of warnings from Beijing. She acknowledged that Taiwan is a self-ruled democracy, but Beijing considers the island a breakaway province and says it has no right to conduct foreign relations. After that, China launched military drills in the airspace and waters around Taiwan on the next day. On Friday, Beijing announced sanctions against Pelosi and her immediate family members, though the content of those sanctions was unspecified.
CrudeOIL
Crude oil price slumped while ending last week session at the price of $88.53 per barrel. Crude oil price received bearish momentum last week after the US Crude Oil Inventories showed a huge stockpile, dragging the appeal of this black commodity. According to the EIA, the US crude oil inventories level rose by 4.467M, while the consensus forecast was expecting to see a -0.629M of inventories drawdown. Furthermore, the overall trend of oil price remained bearish after OPEC+ claimed that it would increase its oil output. OPEC+ is set to raise its oil output goal by 100,000 barrels per day, an amount analysts said was a setback to U.S. President Joe Biden after his trip to Saudi Arabia to ask the producer group’s leader to pump more to help the United States and the global economy.
Weekly Outlook: August 8 – 12
For the week ahead, investors would continue to focus on crucial economic data such as the US CPI data 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: August 8 – 12
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 8th August 2022 | |||||
| – | – | N/A | – | – | – |
| Tuesday – 9th August 2022 | |||||
| – | – | N/A | – | – | – |
| Wednesday – 10th August 2022 | |||||
| 0:00 | USD | EIA Short-Term Energy Outlook | – | – | – |
| 20:30 | USD | Core CPI (MoM) (Jul) | – | 0.50% | 0.70% |
| 20:30 | USD | CPI (YoY) (Jul) | – | 8.70% | 9.10% |
| 22:30 | USD | Crude Oil Inventories | – | – | 4.467M |
| Thursday – 11th August 2022 | |||||
| All Day | – | Japan – Mountain Day | – | – | – |
| 20:30 | USD | Initial Jobless Claims | – | 263K | 260K |
| 20:30 | USD | PPI (MoM) (Jul) | – | 0.30% | 1.10% |
| Friday – 12th August 2022 | |||||
| 14:00 | GBP | GDP (YoY) (Q2) | – | 2.80% | 8.70% |
| 14:00 | GBP | GDP (QoQ) (Q2) | – | -0.20% | 0.80% |
| 14:00 | GBP | GDP (MoM) | – | -1.20% | 0.50% |
| 14:00 | GBP | Manufacturing Production (MoM) (Jun) | – | -1.20% | 1.40% |
| 14:00 | GBP | Monthly GDP 3M/3M Change | – | – | 0.40% |
Risk Statement:
Forex, Gold, Crude Oil, Commodities, CFD and all other margin trading investment products involve high level of risk and may not be suitable for all investors. Your previous investment success in stock, futures or any other investment achieved does not mean that all your future investment will obtain the same results. You should carefully consider your investment objectives; risk associated and seek professional advice before deciding to trade or if you have any doubts.