17 January 2022 Weekly Analysis
GCMAsia Weekly Report: January 17 – 21
Market Review (Forex): January 10 – 14
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 risk-on sentiment in the global financial market, which prompting investors to shift their portfolio from United States to other countries. Nonetheless, the losses experienced by the US Dollar was limited by hawkish expectation from Federal Reserve. The Dollar Index has ended last week session at the price of 95.15.
On the economic data front, U.S. Bureau of Labor Statistics reported that the U.S. Producer Price Index (PPI) for last month notched down significantly from the previous reading of 1.0% to 0.2%, missing the market forecast at 0.4%. Besides, U.S. Initial Jobless Claims and the U.S. Retail Sales for last month came in at 230K and -1.9%, which both fared worse-than-market expectation at 200K and -0.1% respectively. As most of the crucial economic data had fared worse-than-expectation, which dialing down market optimism toward the economic progression in the United States. On the other hand, the risk-on sentiment around the world amid easing Covid-19 variant fears had spurred further bearish momentum on the safe-haven US Dollar. According to Bloomberg, the omicron Covid-19 variant causes less severe disease than the delta strain even in those who are unvaccinated. Data from South Africa, the first country to have a major outbreak caused by the strain, has so far shown lower hospitalization and death rates.
Nonetheless, the losses experienced by the US Dollar was limited following Federal Reserve unleashed their hawkish tone toward the economic outlook in United States. According to Fed official John Williams, he claimed that the Federal Reserve should be tightening the earlier expansionary monetary policy in order to stabilize the inflation rate in short-term basis. Besides, Fed official Charles Evans said that the Fed may need to increase the interest rates by at 4 times if the inflationary pressure continues to persist in long-term basis. Contractionary monetary policy would diminish the money circulation in the US market, which increasing the appeal for the US Dollar. As for now, investors would continue to remain their focus toward the latest crucial economic data from United States as well as rate hike decision from Federal Reserve 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 114.45. The overall bullish momentum for the USD/JPY was mainly due to the depreciation of Japanese Yen. The safe-haven Yen received significantly bearish momentum amid easing Covid-19 fears around the world, which stoked a shift in sentiment toward riskier asset. Besides, the Japanese Yen extend its losses over the backdrop of bearish economic data. According to Bank of Japan, Japan Producer Price Index (PPI) for last month notched down significantly from the previous reading of 0.7% to -0.2%, missing the market forecast at 0.3%.
EUR/USD
The pair of EUR/USD surged throughout the week while ending last week session at the price of 1.1415. The overall momentum for the Euro remained bullish following the European Central Bank (ECB) unleashed their hawkish tone on last week. According to Reuters, ECB President Christine Lagarde said on last Tuesday that the European Central Bank would continue to monitor on significant level of inflation rate in future. If the inflation rate continues to exceed the expectation, the European Central Bank vowed to implement contractionary monetary policy and increase the interest rate in future in order to stabilize the inflation risk.
GBP/USD
The pair of GBP/USD appreciated 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 of depreciation of US Dollar. Besides, the Pound Sterling received further bullish momentum over the backdrop of a string of upbeat economic data. According to Office for National Statistics, U.K. Monthly Gross Domestic Product (GDP) increased significantly from the previous reading of 0.2% to 0.9%. Meanwhile, U.K. Manufacturing Production for last month notched up significantly from the previous reading of 0.1% to 1.1%, which also exceeding the market expectation at 0.2%.
Market Review (Commodities): January 10 – 14
GOLD
Gold price slumped significantly last week with the price of $1812.05 per troy ounce following the Federal Reserve unleashed their hawkish tone toward the economic progression. Several Fed officials had suggested to implement contractionary monetary policy in short-term basis as the inflation rate continues to hover at 30 years high. According to Fed Rate Monitor Tool, market participants are now currently pricing in for an 80% probability of rate hike during March’s policy meetings. Contractionary monetary policy would reduce the inflation risk in future, which dragging down the appeal for the inflation-hedge commodity such as gold.
CrudeOIL
The price of crude oil surged last week while closing last Friday session with the price of $83.68. Rising geopolitical risk in between Russia and Ukraine had spurred speculation over possibility of oil supply interruption from the region, which spurring bullish momentum for this black commodity. Besides, the crude oil price extends its gains amid bullish inventory data. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories declined significantly from the previous reading of -2.144M to -4.553M, better than the market forecast at -1.904M.
Weekly Outlook: January 17 – 21
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 17 – 21
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 17th January 2022 | |||||
| 10:00 | CNY | GDP (YoY) (Q4) | – | 3.60% | 4.90% |
| 10:00 | CNY | Industrial Production (YoY) (Dec) | – | 3.60% | 3.80% |
| Tuesday – 18th January 2022 | |||||
| Tentative | JPY | BoJ Monetary Policy Statement | – | – | – |
| Tentative | JPY | BoJ Outlook Report (YoY) | – | – | – |
| Tentative | JPY | BoJ Press Conference | – | – | – |
| 15:00 | GBP | Average Earnings Index +Bonus (Nov) | – | 4.20% | 4.90% |
| 15:00 | GBP | Claimant Count Change (Dec) | – | -38.6K | -49.8K |
| 18:00 | EUR | German ZEW Economic Sentiment (Jan) | – | 32.7 | 29.9 |
| Wednesday – 19th January 2022 | |||||
| 15:00 | GBP | CPI (YoY) (Dec) | – | 5.20% | 5.10% |
| 21:30 | USD | Building Permits (Dec) | – | 1.701M | 1.717M |
| 21:30 | CAD | Core CPI (MoM) (Dec) | – | – | 0.60% |
| 22:15 | GBP | BoE Gov Bailey Speaks | – | – | – |
| Thursday – 20th January 2022 | |||||
| 8:30 | AUD | Employment Change (Dec) | – | 30.0K | 366.1K |
| 9:30 | CNY | PBoC Loan Prime Rate | – | – | 3.80% |
| 18:00 | EUR | CPI (YoY) (Dec) | – | 5.00% | 5.00% |
| 20:30 | EUR | ECB Publishes Account of Monetary Policy Meeting | – | – | – |
| 21:30 | USD | Initial Jobless Claims | – | 220K | 230K |
| 21:30 | USD | Philadelphia Fed Manufacturing Index (Jan) | – | 20 | 15.4 |
| 23:00 | USD | Existing Home Sales (Dec) | – | 6.43M | 6.46M |
| Friday – 21st January 2022 | |||||
| 0:00 | USD | Crude Oil Inventories | – | – | -4.553M |
| 14:00 | GBP | Retail Sales (MoM) (Dec) | – | -0.60% | 1.40% |
| 20:30 | EUR | ECB President Lagarde Speaks | – | – | – |
| 21:30 | CAD | Core Retail Sales (MoM) (Nov) | – | 1.30% | 1.30% |