17 May 2020 Weekly Analysis
GCMAsia Weekly Report: May 17 – 21
Market Review (Forex): May 10 – 14
US Dollar
The dollar index which traded against a basket of six major currency pairs have gave up most of its gains after a sharp rise during earlier half of last week, but still ending the week with gain at the price of 90.23 as market digest economic numbers and potential impact on inflation.
For last week, most of the data was skewed to the positive. Employment data such as Jolts Jobs Opening and Initial Jobless Claims came in better than expected with reading of 8.123M against 7.500M expectation and 473K against expectation of 490K respectively. Core CPI data released on last Wednesday also rose to their highest in 12 months to 0.9%, surpassed market expectation of 0.3%. PPI also came in higher than expectation to 0.6% against 0.3% expectation. Following signs of inflation pressure from CPI and PPI, the market believes that Fed may raise interest rate to counter inflation, thus causing the dollar to surge after the release of inflation data.
That said, the dollar gains were soon capped as Fed officials point out that the spike in inflation was expected and likely temporary. According to Fed Governor Christopher Waller, the Fed need to see several more months of jobs data and inflation before determine when to begin scaling back its easy-money policy. Following after that, the greenback experience huge sell-off pressure. On Friday, downbeat Retail Sales data also contribute to the fall as the data came in weaker at 0.0% against 1.0% expectation.
Still, on the backdrop of strong U.S vaccination progress and dwindling cases in COVID-19, market remains hopeful that the inflationary pressure is slowly building up in the U.S and may potentially cause a tone shift in monetary policy in near term. Investors are now looking for further clues from more U.S data.
USD/JPY
Pair of USD/JPY was mostly traded higher last week before ending last Friday session at the price of 109.33. The overall bullish momentum for the pair was mostly by the dollar strength during earlier half of the week. On top of that, news of surging coronavirus cases in Japan also triggers some selling pressure in the Japanese Yen as hospital in Japan are reported to be overwhelmed.
EUR/USD
Pair of EUR/USD manage to recover most of its losses on Friday, but still ending last week at a loss with the price of 1.2144. Following lack of major catalyst, the overall momentum of the pair was mostly due to the strengthening value in the rival currencies, especially in US Dollar. On data front, German ZEW Economic Sentiment rose to 84.4, higher than market expectation of 72.0.
GBP/USD
The pair of GBP/USD was mostly traded higher last week while closing its market at 1.4096. Following the backdrop of economic reopening and strong vaccination program, the pair continues to be favored by the market. On top of that, positive comments from UK officials also help provide boost for the pair. According to UK Vaccine Minister Nadhim Zahawi, he expected that the roadmap for reopening will continue stay in place and vaccine will continue to deliver despite with concerns about Indian variant. On data front, UK GDP improved to -1.5%, better than market expectation of 1.6%.
Market Review (Commodities): May 10 – 14
GOLD
Gold price continue to record gains for the second week while closing its market on Friday at $1843.25 a troy ounce as comments from Fed officials and Commerce Department took some heat off inflationary expectation. After data showed signs of rising inflation, market participants speculated that the Federal Reserve would more likely to raise interest rate decision in near term. However, Fed Governor Christopher Waller stated that the central bank likely needed to see several more months of jobs data and inflation before determine to make a change in its policy. As for now, investors would continue to scrutinize the latest updates with regards of the economic data as well as the Covid-19 development in order to receive further trading signal.
CrudeOIL
The crude oil price was up for third week in a row while closing last Friday session with $65.47 per barrel. The oil market was experiencing a volatile session last week amid conflicting themes such as cyberattack, India’s COVID-19 and mixed data. On last week, Colonial Pipeline have experienced a cyberattack that causing its pipeline to shut down and affecting supply which help provide some boost for the oil price. However, the pipeline was fully restored on Thursday. On the other hand, coronavirus cases remain high on major oil consumer India which continue to trigger concerns of demand as India reported 300,000+ cases and past the 24 million mark in total cases. Meanwhile in data, API and EIA also reported a drop in supply, although EIA was slightly lesser than market expectation.
Weekly Outlook: May 17 – 21
For the week ahead, investors would have to scrutinize the latest developments with regards of the outbreak of the coronavirus, FOMC decision, and crucial data such as Initial Jobless Claims data in order to receive further trading signals.
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 17 – 21
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 17 May 2021 | |||||
| N/A | |||||
| Tuesday – 18 May 2021 | |||||
| 07:50 | JPY | GDP (QoQ) (Q1) | – | -1.2% | 2.8% |
| 09:30 | AUD | RBA Meeting Minutes | – | – | – |
| 14:00 | GBP | Average Earnings Index +Bonus (Mar) | – | 4.6% | 4.5% |
| 14:00 | GBP | Claimant Count Change (Apr) | – | – | 10.1K |
| 20:30 | USD | Building Permits (Apr) | – | 1.770M | 1.759M |
| Wednesday – 19 May 2021 | |||||
| 14:00 | GBP | CPI (YoY) (Apr) | – | 1.4% | 0.7% |
| 17:00 | EUR | CPI (YoY) (Apr) | – | 1.6% | 1.6% |
| 20:30 | CAD | Core CPI (MoM) (Apr) | – | – | 0.3% |
| 22:30 | CrudeOIL | Crude Oil Inventories | – | – | -0.427M |
| Thursday – 20 May 2021 | |||||
| 02:00 | USD | FOMC Meeting Minutes | – | – | – |
| 09:30 | AUD | Employment Change (Apr) | – | 15.0K | 70.7K |
| 10:00 | NZD | Annual Budget Release | – | – | – |
| 20:30 | USD | Initial Jobless Claims | – | 450K | 473K |
| 20:30 | USD | Philadelphia Fed Manufacturing Index (May) | – | 43.0 | 50.2 |
| Friday – 21 May 2021 | |||||
| 14:00 | GBP | Retail Sales (MoM) (Apr) | – | 4.0% | 5.4% |
| 15:30 | EUR | German Manufacturing PMI (May) | – | 65.8 | 66.2 |
| 16:30 | GBP | Manufacturing PMI (May) | – | 60.7 | 60.7 |
| 16:30 | GBP | Services PMI (May) | – | 60.1 | 60.1 |
| 20:30 | CAD | Core Retail Sales (MoM) (Mar) | – | 2.0% | 4.8% |
| 22:00 | USD | Existing Home Sales (Apr) | – | 6.09M | 6.01M |