16 January 2023 Weekly Analysis
GCMAsia Weekly Report: January 16 – 20
Market Review (Forex): January 9 – 13
US Dollar
The Dollar Index which traded against a basket of six major currencies received significant bearish momentum last week following the rising market expectation upon lower rate hike by Fed, which prompting investors to shift their capitals toward other assets. The Dollar Index has closed its market price at 101.85.
Last week, the US Dollar extended its losses amid the background of easing inflationary risk in the US. According to the US Bureau of Labor Statistics, the US Consumer Price Index (CPI) MoM for December notched down from the previous reading of 0.1% to -0.1%, which is the first decline since June 2020. Last year, the US central bank had aggressively raised their interest rate as they committed to bring down the spiking inflation risk. As of now, the rate hike path has come out with a desired effect, as well as the market participants was anticipating that Fed would likely to scale back its rate hike pace. On the other hand, the dovish speech from Fed member was putting further pressure on the US Dollar. According to The New York Time, Susan M. Collins, the president of the Federal Reserve Bank of Boston claimed on Wednesday that she was inclined toward 25 basis point hikes in the February meeting. She deemed that smaller hike of interest rate would likely to provide more spaces for them to access the incoming data before decision-making.
However, the losses experienced by US Dollar was limited after Fed members reiterated their aggressive rate hike stance. St. Louis Fed President James Bullard appeared his speech after the announcement of CPI data, that the inflation target had went in the right direction. Nonetheless, he suggested the US central bank to increase its rate by exceeding 5% as soon as possible following the inflation remains far above the Fed’s 2% target.
USD/JPY
The pair of USD/JPY extended its losses last week while closing its market price at 127.82. The pairing received significant bearish momentum following the slump of US Dollar. The lower-than-expected CPI figures had shown that the inflation risk in the US was reducing, which diminishing the odds of continuous aggressive rate hike plan. Besides that, the value of Japanese Yen appreciated following the expectation that the Bank of Japan (BoJ) may review the monetary policy in the next meeting. According to the latest news from Yomiuri, the BoJ is expected to review the side effects of its massive monetary easing in the upcoming meeting despite the last month’s modification of bond yield controls strategy. It provided a hint that the BoJ might started to follow the step of major central banks, whereby increase its interest rate.
EUR/USD
The pair of EUR/USD appreciated last week while closing its market price at 1.0831. The Euro received bullish momentum over the sharp depreciation of US Dollar. As the expectation of aggressive rate hike by Fed was reduced, it sparked the appeal of risk-appetite currencies such as Euro. On the other hand, the gains experienced by Euro was extended following the hawkish statement from European Central Bank (ECB). According to Reuters, ECB policymaker Pablo Hernandez de Cos claimed on last Wednesday that the central bank was anticipated to continue raising interest rates “significantly” at future meetings, at a sustained pace, to ensure that inflation returns to the 2% target over the medium term, which spurring further bullish momentum on the Euro.
GBP/USD
The pair of GBP/USD surged last week while ending last week session at the price of 1.2227. The Pound received bullish momentum last week amid the losses of US Dollar. The lower-than-expected US CPI figures has dialed down the market speculation on hefty rate hike in the upcoming meeting, which stoked a shift in sentiment toward other currencies such as Pound Sterling. Though, the gains of Pound Sterling was limited following the downbeat economic data was released. According to Office for National Statistics, the UK Gross Domestic Product (GDP) YoY notched down from the previous reading of 1.5% to 0.2%. In addition, the UK Manufacturing Production MoM was decreased in November, which rising the fears against economic progression in the UK.
Market Review (Commodities): January 9 – 13
GOLD
Gold price rose significantly last week while closing its market price at $1920.17 per troy ounces. Gold price received bullish momentum last week over the depreciation of US Dollar upon reducing odds of aggressive rate hike path. Despite the hawkish was given by Fed member, the investors still skeptical about the Fed’s rate hikes plan, as well as they are highly belief that Fed would less likely to raise its interest rate more than 5% in the February meeting. According to CME FedWatch Tool, the likelihood of 25 basis point had rose to 93.7% after the weaker CPI data has been released.
CrudeOIL
Crude oil price rose significantly while ending last week session at the price of $80.04 per barrel. Crude oil price received bullish momentum last week following the weakening of US Dollar. Since the aggressive rate hike path might be scale back, it dragged down the value of US Dollar. With that, it dialed up the demand for oil as dollar-denominated commodities become cheaper for holder of other countries. Furthermore, the EU’s sanctions against the petroleum products from Russia had extended oil price’s gains. The US Energy Information Administration said the upcoming EU ban on seaborne imports of petroleum products from Russia on Feb 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022. Besides, the reopening of China’s border after the end of strict Covid-19 curbs had also boosted optimism that demand for this black commodity, overshadowed the effect of stockpiles in the US over the past week.
Weekly Outlook: January 16 – 20
For the week ahead, investors would continue to focus on crucial economic data such as the PPI and Beige Book 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: January 16 – 20
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 16th Jan 2023 | |||||
| All Day | USD | Martin Luther King, Jr. Day | – | – | – |
| 18:00 | EUR | German ZEW Economic Sentiment (Jan) | – | -15.5 | -23.3 |
| 23:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| Tuesday – 17th Jan 2023 | |||||
| 10:00 | CNY | GDP (YoY) (Q4) | – | 1.8% | 3.9% |
| 10:00 | CNY | Industrial Production (YoY) (Dec) | – | 0.5% | 2.2% |
| 15:00 | GBP | Average Earnings Index +Bonus (Nov) | – | 6.1% | 6.1% |
| 15:00 | GBP | Claimant Count Change (Dec) | – | 19.8K | 30.5K |
| 15:00 | EUR | German CPI (YoY) (Dec) | – | 8.6% | 8.6% |
| 20:00 | CrudeOIL | OPEC Monthly Report | – | – | – |
| 21:30 | CAD | Core CPI (MoM) (Dec) | – | – | – |
| Wednesday – 18th Jan 2023 | |||||
| 11:00 | JPY | BoJ Outlook Report (YoY) | – | – | – |
| Tentative | JPY | BoJ Press Conference | – | – | – |
| 15:00 | GBP | CPI (YoY) (Dec) | – | 10.6% | 10.7% |
| 18:00 | EUR | CPI (YoY) (Dec) | – | 9.2% | 9.2% |
| 21:30 | USD | Core Retail Sales (MoM) (Dec) | – | -0.4% | -0.2% |
| 21:30 | USD | PPI (MoM) (Dec) | – | -0.1% | 0.3% |
| 21:30 | USD | Retail Sales (MoM) (Dec) | – | -0.8% | -0.6% |
| Thursday – 19th Jan 2023 | |||||
| 03:00 | USD | Beige Book | – | – | – |
| 08:30 | AUD | Employment Change (Dec) | – | 22.5K | 64.0K |
| 18:30 | EUR | ECB President Lagarde Speaks | – | – | – |
| 20:30 | EUR
|
ECB Publishes Account of Monetary Policy Meeting | – | – | – |
| 21:30 | USD | Building Permits (Dec) | – | 1.370M
|
1.351M |
| 21:30 | USD | Initial Jobless Claims | – | 212K | 205K |
| 21:30 | USD | Philadelphia Fed Manufacturing Index (Jan) | – | -11.0 | -13.8 |
| Friday – 20th Jan 2023 | |||||
| 00:00 | CrudeOIL | Crude Oil Inventories | – | – | 18.962M |
| 15:00 | GBP | Retail Sales (MoM) (Dec) | – | 0.4% | -0.4% |
| 18:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 21:30 | CAD | Core Retail Sales (MoM) (Nov) | – | – | 1.7% |
| 23:00 | USD | Existing Home Sales (Dec) | – | 3.95M | 4.09M |
Risk Statement:
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