GCMAsia Weekly Report: June 12 – 16
Market Review (Forex): June 5 – 9
US Dollar
The dollar index, which trades against a basket of six major currencies, traded lower to 103.47 after ISM Service PMI and initial jobless claim downbeat the market consensus estimation.
Last week, the dollar index slipped after ISM Service PMI recorded in lower reading when compared to previous months. The ISM Service PMI was marked at 50.3 in May versus 51.9 in previous months. The dollar index then traded lower as economists expected the reading to increase to 52.2. However, the reading above the 50 thresholds indicates growth in the overall economy. The Fed may consider no rate hike in upcoming rate decisions as ISM services PMI cools markedly. In addition, the number of new jobless claims surged to a 1.5-year high after the reading recorded 261K more than expectations of 235K. The previous non-farm payroll data was exceptionally good, but an increase in the number of initial jobless claims may mean that the labour market is starting to deteriorate. To avoid rising unemployment, investors increase expectations that the Fed will not raise interest rates.
However, it is worth highlighting that members of the Fed’s opinions on raising rates are divided. Most board members, including Fed Chairman Powell, chose to skip this rate hike, while a small number of members, such as Bullard, chose to raise interest rates more strongly to suppress inflation.
USD/JPY
The USD/JPY pair edged lower to end the market at 139.21 as the dollar weakness amid investors bet on the Fed pause rate hike at the June meeting. The Japanese Yen also extended its gains after Japan’s economy grew more than economists thought as GDP in Q1 grew by 0.7% from 0.1%, more than the preliminary estimate of 0.4%. Driven by first-quarter GDP growth, capital spending by automakers and semiconductor equipment companies rose faster than previously reported data, an administration official said. However, the gains of the Yen were limited by Bank of Japan (BoJ) Governor Ueda Dovish’ s speech. The Bank of Japan said inflation was stronger than expected but high inflation was driven by global supply chains rather than increased consumer demand. BOJ in no rush to end monetary easing early as demand falls as real wages fall
EUR/USD
The pair of EURUSD tickled up by 1.0747 at the end of the week despite weak GDP data from Eurostat on Thursday. Eurozone gross domestic product (GDP) grew to 1.0%, below expectations for a 1.3% increase, according to Eurostat data. The reason for the decline in GDP came from the impact of the two consecutive quarters of recession in the German economy. A German official survey shows that consumer spending accounts for half of Germany’s GDP. Consumers are cautious and reduce spending after being hit by high inflation. Nonetheless, price pressures and inflation data in the EU fell, but not enough to stop the ECB from continuing to tighten monetary policy. This was followed by a hawkish tone from ECB President Christine Lagarde earlier this week, saying it was “too early to call core inflation a peak”.
GBP/USD
The pairs of GBPUSD soared at the end of the week while closing at the price of 1.2576. Sterling rose against the dollar after Monday’s composite purchasing managers’ index fell short of economists’ expectations. Britain’s Composite Purchasing Managers’ Index fell to 54.0 in May from 54.9 in April, above the 53.9 forecast by economists polled by Reuters. Although the PMI reading was down, the reading was above the 50 thresholds, reflecting some expansion in the overall economy during the month the main contributor to growth in service firms in the UK was input costs, which were boosted as higher wage payments led to a sharp rise in price charges.
Market Review (Commodities): June 5 – 9
GOLD
Gold price ticked up at the end of the week while closing at the price of 1960.70. Gold rebounds on weaker dollar after U.S. economy shows slowing services sector growth and weak labor conditions. Gold’s gains were limited, however, as consultancy Metals Focus said prices would ease back from last year’s record highs in the second half of 2023 as demand from central banks fell 9% to 4,375 metric tons, adding gold prices will be under pressure in the second quarter. With such a backdrop, investors will weigh the Fed’s pause in June rate hikes and demand for central bank gold reserves ahead of more economic data.
CrudeOIL
Crude Oil prices slipped at the end of the week while settling at the price of 70.10 per barrel. Early in the week, the crude oil edges up after the Saudi Arab announced 1 million barrels per day production cuts starting in July through next year. However, the crude oil price decreased after China’s international trade data showed a contraction. China’s export in May down from 8.5% to -7.5%, while the import slightly improved to -4.5% from the previous of -7.9%. Both data indicated business activities were contracted in May. Furthermore, the consumer price index (CPI) drop-in monthly basis, from previous -0.1% to 0.2%, lower than market expectations of -0.1%. With such a backdrop, the crude oil price slipped as deflation occurred in China’s economy amid demand wanes.
Weekly Outlook: June 12- 16
For the week ahead, investors will continue to focus on crucial economic data such as US Consumer Price Index (CPI), Producer Price Index (PPI) and FOMC interest rate decision this week to determine further direction.
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 12 – 16
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 12 June 2023 | |||||
| All Day | AUD | Australia – King’s Birthday | – | – | – |
| Tuesday – 13 June 2023 | |||||
| 14:00 | EUR | German CPI (MoM) (May) | – | 0.1% | 0.4% |
| 20:30 | USD | Core CPI (MoM) (May) | – | 0.4% | 0.4% |
| 20:30 | USD | CPI (MoM) (May) | – | 0.3% | 0.4% |
| 20:30 | USD | CPI (YoY) (May) | 4.9% | ||
| 22:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| Wednesday – 14 June 2023 | |||||
| 04:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | -1.710M |
| 14:00 | GBP | GDP (MoM) (Apr) | – | 0.3% | -0.3% |
| 20:30 | USD | PPI (MoM) (May) | – | 0.2% | 0.2% |
| 22:30 | CrudeOIL | Crude Oil Inventories | – | – | -0.451M |
| Thursday – 15 June 2023 | |||||
| 02:00 | USD | FOMC Economic Projections | – | – | – |
| 02:00 | USD | FOMC Statement | – | – | – |
| 02:00 | USD | Fed Interest Rate Decision | – | 5.25% | 5.25% |
| 02:30 | USD | FOMC Press Conference | – | – | – |
| 06:45 | NZD | GDP (QoQ) (Q1) | – | -0.1% | -0.6% |
| 10:00 | CNY | Industrial Production (YoY) (May) | – | 4.1% | 5.6% |
| 10:00 | CNY | Chinese Unemployment Rate (May) | – | – | 5.2% |
| 20:15 | EUR | Deposit Facility Rate (Jun) | – | 3.50% | 3.25% |
| 20:15 | EUR | ECB Interest Rate Decision (Jun) | – | 4.00% | 3.75% |
| 20:30 | USD | Core Retail Sales (MoM) (May) | – | – | 0.4% |
| 20:30 | USD | Initial Jobless Claims | – | – | 261K |
| 20:30 | USD | Philadelphia Fed Manufacturing Index (Jun) | – | – | -10.4 |
| 20:30 | USD | Retail Sales (MoM) (May) | – | – | 0.4% |
| 20:45 | EUR | ECB Press Conference | – | – | – |
| Friday – 16 June 2023 | |||||
| 14:30 | JPY | BoJ Press Conference | – | – | – |
| 17:00 | EUR | CPI (YoY) (May) | – | 6.1% | 6.1% |
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