15 May 2023 Weekly Analysis
GCMAsia Weekly Report: May 15 – 19
Market Review (Forex): May 8 – 12
US Dollar
The dollar index, which trades against a basket of six major currencies, extended gains even as uncertainty remained over the U.S. economy.
Last week, the dollar index edged up ahead of the CPI report released as markets highly anticipated the April CPI will remain stubbornly high at the same reading of 5.0% due to the labor market showing resilient conditions in March. Investors are focusing on the CPI data because the reading of the CPI higher than the forecast value will prompt the Fed to continue raising interest rates, and vice versa. However, the CPI results released on Wednesday edged down by -0.1% to 4.9%. This also means that the Federal Reserve’s previous aggressive interest rate hike policy has made good progress, and the dollar has also fallen with it.
However, the dollar regained its luster in the next few days after investors shook off their pessimism, as the current CPI reading is still far from the Fed’s target of 2% to 3%. That doesn’t rule out the possibility that the Fed could extend its tightening measures for several months to curb high inflation. Meanwhile, the dollar’s gains extended after the Governor of the Bank of England (BoE) issued a dovish outlook on its monetary policy. As a result, the Pound sterling fell and strengthened the dollar index. The dollar index continued to rise despite a series of downbeat economic data being released. The economic data included a rise in Initial Jobless Claims to 264K vs. a consensus of 245K and a Producer Price Index reading of 0.2%, below consensus expectations of 0.3%.
USD/JPY
The pair of USD/JPY edged up while closing its market price at 135.71 amid Yen weakened on consumer sentiment. According to the Statistics Bureau of Japan, household spending in March was expected to grow by 0.4%, however, the actual reading declined to -1.9% from 1.6%, a surprise on the downside. The survey indicated that household spending with two or more people spent rose to an average of 312,758 yen amid high food, energy, and other prices impacted by the Russian War, the Ministry of Internal Affairs and Communications said. Prime Minister of Japan Kishida has stepped up his call for better pay amid high inflation, and weak yen currency. However, the biggest pay rises In decades offered by large companies unable to make the real wages go up.
EUR/USD
The pair of EUR/USD was traded down last week while closing its market price at 1.0849 as its economy became worsen. Recent data from Germany confirmed that CPI fell to 7.2% in March, while the country’s industrial production fell by 3.4%. In addition, the EU Sentix investor confidence index fell to -13.1 in May, below market expectations. Such backdrop, the attractiveness of the euro has declined. Besides, ECB members hawkish tone fail to EUR as adding nothing new to what the market already knows.
GBP/USD
The GBP/USD traded lower while closing the market at 1.2447. The pound sterling lost ground after the market’s largest price in the move of tightening by the BoE. The BoE decided to increase the rates by 25 basis points to 4.5% as 7 out of 9 committee members were in favor of a rate hike. The pound extends its losses after the BoE Governor delivered a dovish speech. Bailey said at the press conference that the impact of previous rate hikes will be reflected in the coming months. This also implies that the Bank of England may maintain the current interest rate instead of raising interest rates. The recent GDP data also showed a contraction appears in the UK economy. According to Office for Nasional Statistics UK, the Q1 GDP data fell to 0.2% from 0.6% as consumers turned more cautious in a high-interest rate environment.
Market Review (Commodities): May 8 – 12
GOLD
Gold prices traded lower at $2009.43 a troy ounce following a prior from the $ 2048 level. Gold prices experienced intense volatility last week when crucial economic data was released in the US. The previous gains in gold prices came from the cooled inflation data in the US. The yearly CPI data dropped 0.1% to 4.9% from 5.0%. However, the US dollar regained its luster after the investors digested the CPI data. The recent CPI remained stubborn at 4.9% and well above the Fed 2% long run average target. It prompted Investors that Fed’s high interest rates to last for a long time.
CrudeOIL
Crude oil prices experienced a volatile at the end of last week’s session while closing at the price of $69.99 per barrel. The oil prices broke above $70.05 amid Energy Information Administration (EIA) released an optimistic outlook for crude oil. The EIA estimated that crude will remains around $73.62 in 2023 down from $5.62 from last month estimate for the year. Market sentiment over weakening global economy, banking sector turmoil and debt ceiling issues outweighed concerns about OPEC+ supply cuts. In addition, the dollar index rebounded recently has also shrank the demand in non-U.S. countries, as other countries cost to buy crude at premium prices.
Weekly Outlook: May 15-19
For the week ahead, investors will continue to focus on crucial economic data such as US Retails Sales, Euro CPI and Powell speech this week to determine further direction. Besides that, the latest situation of the debt crisis issues, and banking turmoil in US 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: May 15 – 19
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 15th May 2023 | |||||
| N/A | |||||
| Tuesday – 16th May 2023 | |||||
| 09:30 | AUD | RBA Meeting Minutes | – | – | – |
| 10:00 | CNY | Industrial Production (YoY) (Mar) | – | 10.1% | 3.9% |
| 14:00 | GBP | Average Earnings Index +Bonus (Feb) | – | 5.8% | 5.9% |
| 14:00 | GBP | Claimant Count Change (Mar) | – | – | 28.2k |
| 16:00 | CrudeOIL | IEA Monthly Report | – | – | – |
| 17:00 | EUR | German ZEW Economic Sentiment (Apr) | – | -5.5% | 4.1% |
| 20:30 | USD | Core Retail Sales (MoM) (Apr) | – | 0.4% | -0.4% |
| 20:30 | USD | Retail Sales (MoM) (Apr) | – | 0.7% | -0.6% |
| 20:30 | CAD | Core CPI (MoM) (Apr) | – | – | 0.6% |
| 22:00 | EUR | ECB President Lagarde Speaks | |||
| Wednesday – 17th May 2023 | |||||
| 04:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | 3.618M |
| 07:50 | JPY | GDP (QoQ) (Q1 | – | 0.1% | 0.0% |
| 17:00 | EUR | CPI (YoY) (Apr) | – | 7.0% | 6.9% |
| 17:50 | GBP | BoE Gov Bailey Speaks | |||
| 20:30 | USD | Building Permits (Apr) | 1.430M | 1.430M | |
| 22:30 | CrudeOIL | API Weekly Crude Oil Stock | -0.917M | 2.951M | |
| Thursday – 18th May 2023 | |||||
| 09:30 | AUD | Employment Change (Apr) | – | 25.0K | 53.0K |
| 10:00 | NZD | Annual Budget Release | – | – | – |
| 19:00 | EUR | ECB President Lagarde Speaks | — | – | – |
| 17:15 | GBP | BoE MPC Treasury Committee Hearings | – | – | – |
| 20:30 | USD | Initial Jobless Claims | – | 254K | 264K |
| 20:30 | USD | Philadelphia Fed Manufacturing Index (May) | – | -19.0 | -31.3 |
| 22:00 | USD | Existing Home Sales (Apr) | – | 4.30M | 4.44M |
| Friday – 19th May 2023 | |||||
| 20:30 | CAD | Core Retail Sales (MoM) (Mar) | – | -0.8% | -0.7% |
| 23:00 | USD | Fed Chair Powell Speak | – | – | – |
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