16 May 2022 Weekly Analysis
GCMAsia Weekly Report: May 16 – 20
Market Review (Forex): May 9 – 13
US Dollar
The Dollar Index which traded against a basket of six major currencies received significant bullish momentum last week amid the backdrop of concerns for inflation risk from the market, which prompting investors to shift their capitals toward US Dollar. The Dollar Index has closed its market price at 104.51.
Last week, the US Dollar index extended its gains following the inflation risk keep hovering in the market. Russia invasion of Ukraine had led to the disruption of global supply chain, causing the commodities price such as crude oil to soar. The war-driven inflation had brought negatives prospects toward global economic growth. Besides, according to US Bureau of Labor Statistics, US Core Consumer Price Index (CPI) MoM notched up from the previous reading of 0.3% to 0.6%, exceeding the market forecast of 0.4%. Core Consumer Price Index (CPI) is used as an indicator to present the changes in purchasing trends and inflation of a country, which measuring the changes in the price of goods and services and excluding food and energy. The soaring inflation risk would likely to increase the odds of rate hike from Federal Reserve, which sparked the appeal for the US Dollar. On the other hand, Federal Reserve Chairman Jerome Powell had claimed that the US central bank will act aggressively to stamp out inflation. He reiterated that the additional 50 basis point rate hike should be on the table for the next couple of meetings, which sparkling the appeal for the US Dollar. The rate hike decision from Fed would likely to increase the risk-free return of investors, prompting investors to shift their capitals toward US Dollar.
USD/JPY
The pair of USD/JPY depreciated last week while closing its market price at 129.21. The pairing received bearish momentum amid the easing of US 10 Year Treasury yield. According to CNBC, US 10 Year Treasury yield dropped to 2.81% on May 12. The slumping US Treasury yield would diminish the risk-off return of investors, dialed down the market optimism toward US Dollar. Nonetheless, the overall trend for USDJPY remained bullish over the Bank of Japan (BoJ) remained its dovish tone, as it was committed to keeping monetary policy loose. BoJ had applied a negative interest rate of minus 0.1 percent to the Policy-Rate Balances in current accounts held by financial institutions at the Bank. Rather than introducing flexibility to its monetary policy, the central bank in a statement reiterated its commitment to the 10-year yield target, saying it will conduct an unlimited fixed-rate operation to buy 10-year Japanese government bonds at 0.25% every day. Besides, the rate hike from Federal Reserve had dialed up the market optimism toward US Dollar, prompting investors to purchase US Dollar which having better prospects and selloff Japanese Yen.
EUR/USD
The pair of EUR/USD slumped last week while closing its market price at 1.0412. The Euro received bearish momentum following the hawkish tone from Fed. As Fed would likely to raise interest rate by 50 basic points in the next meetings, it dialed up the market optimism toward US Dollar and prompting investors to selloff Euro. Besides, the spike of commodities price such as crude oil had dialed down the market optimism toward Euro. As Europe was one of the dependent on the commodities, the surge of commodities price would cause the Europe companies’ import cost to soar, which may lead to the disruption of economic progression in Europe region, spurring further bearish momentum on the pair.
GBP/USD
The pair of GBP/USD depreciated last week while ending last week session at the price of 1.2264. The Pound received bearish momentum last week over the downbeat economic data. According to Office for National Statistics, UK Gross Domestic Product (GDP) YoY recorded at the reading of 8.7%, missing the market forecast of 9.0%. GDP is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. The passive GDP data indicated that the recession of economic growth in UK region, dragged down the market optimism toward economic progression in UK. Besides, the rate hike from Federal Reserve had dialed up the market optimism toward US Dollar, prompting investors to purchase US Dollar which having better prospects and selloff Pound.
Market Review (Commodities): May 9 – 13
GOLD
Gold price depreciated last week while closing its market price at $1810.30 per troy ounces. Gold price received bearish momentum last week following the strengthening US Dollar. The rate hike decision from Federal Reserve would likely to diminish US Dollar circulation in the market, dialed up the market optimism toward US Dollar. Besides, the rate hike decision had led to the surge of US 10-year Treasury yield, prompting investors to selloff volatile assets such as gold and purchase risk-off assets such as US Treasury Bill.
CrudeOIL
Crude oil price eased while ending last week session at the price of $108.30 per barrel. Crude oil price received bearish momentum over the backdrop of surging Covid-19 cases in China. As the China Covid-19 cases rose, the China government implemented lockdown in order to eliminate the spread of coronavirus. The lockdown would reduce the business operation of companies in China, which led to the diminishing of crude oil demand and causing the oil price to drop. Nonetheless, the losses of oil price was limited following Russia unveiled a set of sanctions on energy companies operating on the continent that could further threaten supply, spurring upward momentum on the oil price.
Weekly Outlook: May 16 – 20
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims and Fed monetary policy decision 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: May 16 – 20
| Time | Marekt | Event | Actual | Forecast | Previous |
| Monday – 16th May 2022 | |||||
| 10:00 | CNY | Industrial Production (YoY) (Apr) | – | 0.4% | 5.0% |
| 22:15 | GBP | BoE MPC Treasury Committee Hearings | – | – | – |
| Tuesday – 17th May 2022 | |||||
| 09:30 | AUD | RBA Meeting Minutes | – | – | – |
| 14:00 | GBP | Average Earnings Index +Bonus (Mar) | – | 5.4% | 5.4% |
| 14:00 | GBP | Claimant Count Change (Apr) | – | -38.8K | -46.9K |
| 20:30 | USD | Core Retail Sales (MoM) (Apr) | – | 0.3% | 1.4% |
| 20:30 | USD | Retail Sales (MoM) (Apr) | – | 0.8% | 0.7% |
| Wednesday – 18th May 2022 | |||||
| 01:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 02:00 | USD | Fed Chair Powell Speaks | – | – | – |
| 07:50 | JPY | GDP (QoQ) (Q1) | – | -0.4% | 1.1% |
| 14:00 | GBP | CPI (YoY) (Apr) | – | 9.1% | 7.0% |
| 17:00 | EUR | CPI (YoY) (Apr) | – | 7.5% | 7.5% |
| 20:30 | USD | Building Permits (Apr) | – | 1.810M | 1.870M |
| 20:30 | CAD | Core CPI (MoM) (Apr) | – | 0.5% | 1.4% |
| 22:30 | USD | Crude Oil Inventories | – | -0.457M | 8.487M |
| Thursday – 19th May 2022 | |||||
| 09:30 | AUD | Employment Change (Apr) | – | 25.0K | 17.9K |
| 10:00 | AUD | Annual Budget Release | – | – | – |
| 19:30 | EUR | ECB Publishes Account of Monetary Policy Meeting | – | – | – |
| 20:30 | USD | Initial Jobless Claims | – | 200K | 203K |
| 20:30 | USD | Philadelphia Fed Manufacturing Index (May) | – | 16.7 | 17.6 |
| 22:00 | USD | Existing Home Sales (Apr) | – | 5.62M | 5.77M |
| Friday – 20th May 2022 | |||||
| 09:15 | CNY | PBoC Loan Prime Rate | – | – | 3.70% |
| 14:00 | GBP | Retail Sales (MoM) (Apr) | – | -0.2% | -1.4% |