8 November 2021 Weekly Analysis
GCMAsia Weekly Report: November 8 – 12
Market Review (Forex): November 1 – 5
US Dollar
The dollar index which traded against a basket of six major currency pairs eased last week amid Fed interest rate decision. The Dollar Index was closing its price on last Friday session at the price of 94.15.
US dollar received its bearish momentum over the backdrop of dovish tone from Chair of the Federal Reserve of the United States Jerome Powell. He claimed that the upward pressure on price is “expected to be transitory”, while maintaining the US interest rate at nearly 0% rate in order to maintain the economic stability.
Nonetheless, the losses experienced by the US dollar was limited after Fed began to taper their monthly bond purchases. Federal Reserve announced that they would begin scaling back its massive $120 billion monthly bond-buying program this month in order to contain surging inflation rate. Soaring consumer demand in United States has collided with supply chain disruptions, prompting the prices of goods to jump significantly in some sectors for longer than the central bank had anticipated. Against the backdrop of robust recovery, the Monetary Policy Committee (MPC) pledged to reduce its purchases of Treasury securities by $10 billion a month while reduce the purchases of agency mortgage-back securities by $5 billion a month. Bond tapering program would likely to reduce the money circulation in the global financial market, which spurred bullish momentum on the US Dollar.
On the economic data front, the US employment data have fared better-than-expected results which illustrate stable recovery momentum in US labor market. According to Bureau of Labor Statistics, U.S. Nonfarm Payrolls figures came at the reading of 531K, exceeding the market forecast at 450K. In addition, U.S. Unemployment Rate in October came at the reading of 4.6%, lower than the market forecast at 4.7%.
USD/JPY
The pair of USD/JPY slumped significantly last week while ending last week session at the price of 113.40. Japanese yen received its gains amid risk off sentiment. The disappointing interest rate decision from Bank of England (BoE) had prompted investors to shift their portfolio into safe haven such as JPY. On the other side, USD extended its loss amid dovish tone from Chair of the Federal Reserve of the United States Jerome Powell. Fed chose to keep its interest rate unchanged as the inflation pressure was expected to be transitory in order to maintain economic stability.
EUR/USD
The pair of EUR/USD slumped slightly last week while ending last week session at the price of 1.1565. Euro experienced its losses amid dovish stances from ECB. According to member of ECB Isabel Schnabel, she argued that the current inflation pressure was expected to be transitory while interest rate hike will only be initiated in next year at the earliest. ECB also estimated that the current inflation pressure is about to ease off before end of year 2021 while hovering around the target of 2%.
Nonetheless, the bearish momentum of the pair of EUR/USD was limited amid worries of soaring inflation in US. The recent upbeat US employment data suggested the improving labor market which could result in increasing consumer spending in the region.
On the economic data front, according to Markit Economics, Germany Manufacturing Purchasing Managers Index (PMI) in October eased from the previous reading of 58.4 to 57.8, lower than the forecasted reading of 58.2. The data suggested a slowdown in manufacturing sectors in the region due to the recent global supply bottlenecks which results in factories struggling to get their required raw materials.
GBP/USD
The pair of GBP/USD had slumped last week while closing its market price at 1.3495. Pound Sterling depreciated last week amid dovish stances from Bank of England (BoE). On Thursday, Bank of England (BoE) had announced its decision by maintaining the interest rate at 0%, while keeping its bond buying programme amounted at 895 billion pounds. The following BoE’s monetary policy announcement had dialed down hopes of investors whom placed their bet on the BoE to be one of the world’s central bank for hiking lending rates. BoE’s policymakers added that they worry about the fall of UK inflation well below of their 2% target in 2023 and 2024 due to projection of drop-off in energy prices in the second half of 2022. In addition, Bank of England also concerned about the post-Covid wage growth in the region. According to BoE Governor Andrew Bailey, he would like to find more clue from future labour market data due to the recent abolishment of prior furlough scheme.
Market Review (Commodities): November 1-5
GOLD
Gold price have surged significantly last week to the price of $1817.85 per troy ounce amid risk off sentiment. Gold prices received its bullish momentum after the announcement of Fed’s decision to maintain its interest rate to curb with the inflation pressure. In addition, the recent upbeat US employment data was expected to boost up the inflation pressure in US due to the increasing consumer spending. The fear of soaring inflation in US had fueled demand of gold as safe haven to hedge against the inflation risk. Not only that, the dovish stances from Bank of England also boosted the demand of gold.
CrudeOIL
The price of crude oil dropped slightly last week while closing last Friday session with the price of $81.15. The oil prices received its bearish momentum amid bearish oil inventory data. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories came in at 3.291M, higher than the market forecast at 2.225M. Nevertheless, the bearish momentum of oil prices was limited as OPEC and its members agreed to stick to their plan to raise their oil output by 400,000 barrels per day (bpd) from December, while ignoring request from US to increase output drastically in order to cool rising fuel prices.
Weekly Outlook: November 8 – 12
For the week ahead, investors would continue to focus on crucial economic data such as US Core CPI in order to determine further direction and U.S inflation pressure.
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: November 8 – 12
| Time | Market | Event | Actual | Forecast | Previous |
| Tuesday – 9th November 2021 | |||||
| 18:00 | EUR | German ZEW Economic Sentiment (Nov) | 20.0 | 22.3 | |
| 21:30 | USD | PPI (MoM) (Oct) | 0.6% | 0.5% | |
| Wednesday – 10th November 2021 | |||||
| 21:30 | USD | Core CPI (MoM) (Oct) | – | 0.4% | 0.2% |
| 21:30 | USD | Initial Jobless Claims | – | 265K | 269K |
| 23:30 | USD | Crude Oil Inventories | – | – | 3.291M |
| Thursday – 11th November 2021 | |||||
| 08:30 | AUD | Employment Change (Oct) | – | 50.0K | -138.0K |
| 10:00 | CNY | Industrial Production (YoY) (Oct) | – | 3.1% | 3.1% |
| 15:00 | GBP | GDP (YoY) (Q3) | – | 6.8% | 23.6% |
| 15:00 | GBP | GDP (YoY) (Q3) | – | 1.5% | 5.5% |
| 15:00 | GBP | Manufacturing Production (MoM) (Sep) | – | 0.1% | 0.5% |
| 18:00 | EUR | ECB Forecast | – | – | – |
| Friday – 12th November 2021 | |||||
| 23:00 | USD | JOLTs Job Openings (Sep) | – | 10.925M | 10.439M |