10 January 2022 Weekly Analysis
GCMAsia Weekly Report: January 10 – 14
Market Review (Forex): January 3 – 7
US Dollar
The dollar index which traded against a basket of six major currency pairs retreats over the backdrop of a string of bearish economic data and spiking numbers of Covid-19 cases in United States, spurring higher odds for the authorities to implement social distancing control to combat the Covid-19 pandemic. Nonetheless, the losses experienced by the US Dollar was limited by the rate hike expectation during the FOMC meeting. The Dollar Index has ended last week session at the price of 95.65.
Last week, most of the crucial economic data from the United States came in at worse-than-expectation reading. According to Institute for Supply Management, U.S. ISM Manufacturing Purchasing Managers Index (PMI) notched down significantly from the previous reading of 61.1 to 58.7, missing the market forecast at 60.0. Meanwhile, U.S. JOLTs Job Opening and U.S. Initial Jobless Claims came in at 10.562M and 207K, which fared worse than market expectation at 11.075M and 197K respectively. The Nonfarm Payrolls on last Friday came in lower at 199K, which also missing the market forecast at 400K. The decrease was relatively due to lower hiring across all economic sector, which dialed down the market optimism toward the economic progression in the United State.
Nonetheless, the losses experienced by the US Dollar was limited by the hawkish expectation from Federal Reserve. The ongoing supply chain issues as well as shortage of staff had increased the inflation rate in the global financial market, which spurring hopes for the Federal Reserve to implement contractionary monetary policy to stabilized the inflation risk in future. According to the FOMC’s meeting minutes, several Fed officials suggests that monetary policy should be tightened faster than expected as the inflation continues to hover at 30 years high. As the same time, the Monetary Policy Committee (MPC) also discussed the possibility to reduce their balance sheet after rate hike was initiated to curb rising inflation. Following the released of meeting minutes, Fed Rate Monitor Tool indicates that investors are currently pricing in for an 80% probability of rate hike during March’s policy meetings.
As for now, investors would be suggested to continue scrutinize the latest updates with regards of the crucial economic data from United States, monetary policy statement from FOMC as well as the Covid-19 development to receive further trading signal.
USD/JPY
The pair of USD/JPY received bullish momentum on last week amid depreciation of Japanese Yen while ending last Friday session at the price of 115.85. The overall economic prospect for Japan region remained bearish following the economic data indicated that the Japan’s real wages fell significantly in November for third month as inflation continue to outstrip stagnant nominal wages. The lower wage rate had diminished the household’s purchasing power in Japan. According to Statistics Bureau, Japan Household Spending dipped significantly from the previous reading of -0.6% to -1.3%, missing the market forecast at 1.6%. Besides, Japanese Prime Minister Fumio Kishida has urged Japanese firms, whose profits have recovered to pre-pandemic levels to increase wages rate at least by 3% or more, aiming the achieve a cycle of growth and wealth distribution. Market participants fear that the rising wages expectation and ultra-loose monetary policy would create higher inflation risk in future, dragging down the appeal for the Japanese Yen.
EUR/USD
The pair of EUR/USD surged throughout the week while ending last week session at the price of 1.1345. The overall momentum for the Euro remained bullish amid depreciation of US Dollar. Besides, the Euro extend its gains amid high inflation data from the European region, spurring hopes for the European Central Bank (ECB) to be tightened the monetary policy in order to stabilize the inflation risk. According to Eurostat, Eurozone Consumer Price Index (CPI) notched up significantly from the previous reading of 4.9% to 5.0%, exceeding the market forecast at 4.7%.
GBP/USD
The pair of GBP/USD surged last week while closing its market price at 1.3505. The overall momentum for the pair of GBP/USD remained bullish mostly due to the depreciation of US Dollar. Besides, the Pound Sterling extend its gains following the United Kingdom unleashed upbeat economic data. According to Markit/CIPS, U.K. Manufacturing Purchasing Managers Index (PMI) came in at 57.9, exceeding the market forecast at 57.6. The UK Manufacturing Production increased at the quickest pace inf our months, buoyed by the increased intakes of new work, economic recovery as well as higher employment rate in UK region. Nonetheless, the gains experienced by the Pound Sterling was limited by the spiking numbers of Covid-19 cases. As for now, investors would continue to observe the hospitalization rate as well as death rate caused by the Covid-19 variant to receive further trading signal.
Market Review (Commodities): January 3 – 7
GOLD
Gold price slumped significantly last week with the price of $1790.55 per troy ounce following the Federal Reserve unleashed their hawkish tone toward the economic progression. According to the Fed’s Meeting Minutes last week, the Monetary Policy Committee (MPC) had discussed the possibility of reducing the number of bond-buying program while increasing the interest rate during the FOMC meeting in March. The implementation of contractionary monetary policy would diminish the money circulation in the global financial market, which reducing the inflation risk in future while dragging down the appeal for the inflation-hedged alternative investment such as gold.
CrudeOIL
The price of crude oil surged last week while closing last Friday session with the price of $79.20. The overall trend for the crude oil price remained bullish amid the supply disruption in Kazakhstan and Libya. According to Reuters, the rising geopolitics risk in Kazakhstan had hit the oil production at the country’s top oilfield Tengiz, while a pipeline maintenance in Libya reduces the oil production to 729,000 barrel per day from 1.3 million bpd last year. Nonetheless, the gains experienced by the crude oil price was limited over the backdrop of bearish inventory data. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories came in at -2.144M, missing the market forecast at -3.283M.
Weekly Outlook: January 10 – 14
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: January 10 – 14
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 10th January 2022 | |||||
| N/A | |||||
| Tuesday – 11st January 2022 | |||||
| 8:30 | AUD | Retail Sales (MoM) (Nov) | – | 4.00% | 4.90% |
| 18:20 | EUR | ECB President Lagarde Speaks | – | – | – |
| 23:00 | USD | Fed Chair Powell Testifies | – | – | – |
| Wednesday – 12nd January 2022 | |||||
| 1:00 | USD | EIA Short-Term Energy Outlook | – | – | – |
| 21:30 | USD | Core CPI (MoM) (Dec) | – | 0.50% | 0.50% |
| 23:30 | USD | Crude Oil Inventories | – | – | -2.144M |
| Thursday – 13rd January 2022 | |||||
| 21:30 | USD | Initial Jobless Claims | – | 205K | 207K |
| 21:30 | USD | PPI (MoM) (Dec) | – | 0.40% | 0.80% |
| Friday – 14th January 2022 | |||||
| 15:00 | GBP | GDP (MoM) | – | – | 0.10% |
| 15:00 | GBP | Manufacturing Production (MoM) (Nov) | – | 0.20% | 0.00% |
| 21:30 | USD | Core Retail Sales (MoM) (Dec) | – | 0.20% | 0.30% |
| 21:30 | USD | Retail Sales (MoM) (Dec) | – | -0.10% | 0.30% |
| 21:30 | EUR | ECB President Lagarde Speaks | – | – | – |