17 July 2023 Weekly Analysis
GCMAsia Weekly Report: July 17 – July 21
Market Review (Forex): July 10 – July 14
US Dollar
The Dollar Index, which was traded against a basket of six major currencies, failed to revive from its prior week’s losses as the US inflation showed a further sign of easing despite majority of the Fed’s members were still tilted toward a stance of more rate hikes in the future. The dollar index ended the trading session at the price of 99.57.
Earlier last week, the June’s Nonfarm Payroll report disappointed the market participants, diminishing the market concern of how high the interest rate will go. In June, the U.S. economy saw the lowest job growth in two and a half years. According to the Labor Department’s employment report, there were 110,000 fewer jobs created in April and May, suggesting that businesses were becoming more cautious in expanding their workforce due to higher borrowing costs. The survey of establishments revealed that nonfarm payrolls only increased by 209,000 jobs in June, marking the smallest gain since December 2020.
Then, the greenback plunged extensively as inflation rate cooled further in June. According to the latest Consumer Price Index released Wednesday by the Bureau of Labor Statistics, the US annual inflation slowed to 3% last month, registering the record of the smallest year-on-year increase since March 2021 and following a 4.0% rise in May. The June Consumer Price Index (CPI) reading was just slightly above the average inflation level of 2.9% observed two decades before the global financial crisis. The data further indicates a moderation in the underlying price trends, highlighting an improved inflationary environment. With that, it probably will discourage the Federal Reserve from raising interest rates aggressively throughout the end of the year.
Going forward, the announcement of the crucial data such as Retail Sales and speeches from the Fed’s members would be the major event the investors are eyeing on as it could provide a clearer picture of future rate hike path.
USD/JPY
The pair of USD/JPY has finally welcomed its reversal trend last week while closing its market price at 144.30. Similarly, the further decline of inflationary pressures in the US weighed on the currency pair. Besides, there are getting more and more investors expecting the Bank of Japan (BoJ) will twist its current monetary policy away from ultra-easing stage.
EUR/USD
The pair of EUR/USD experienced huge bullish momentum throughout the week while ending the last trading session at 1.1225. The pairing of EUR/USD received huge bullish pressures due to the weakness of dollar index. With the outlook of further tightening measures to be carried out by the ECB, the forex pair managed to extend its gains further. Also, the ECB President Christine Lagarde still maintains a hawkish view on interest rates, emphasizing rate hike plan would not be changed in the near term.
GBP/USD
The pair of GBP/USD posted huge gains last week while ending last week’s session at the price of 1.3090. The UK economic output revealed by Official Nasional Statistics (ONS) showed a shrink in May. The monthly Gross Domestic Product (GDP) was reduced to -0.1% from 0.2%, while the economists expect the economic output in May will shrink to -0.3%. Separate economic data such as industrial production and manufacturing Purchasing Managers Index (PMI) was revealed by ONS on Thursday. The monthly reading of UK industrial production in May was reduced to -0.6% from -0.2%, higher than market expectation. According to the report, the decline was due to the fall in three of four main segments with electricity and gas being the largest contributor to the result. While the manufacturing production recorded -0.2% from -0.1%, higher than expectations of -0.5%. However, the weakness of the dollar index managed to save the forex pair from a sharp drop.
Market Review (Commodities): July 10 – July 14
GOLD
The gold price skyrocketed throughout the week while closing its market price at $1955.20 per troy ounce as the United States central bank is nearing the end of its tightening cycle. In June, U.S. producer prices index saw minimal growth, indicating a further decline in inflationary pressures and providing additional evidence of the economy’s transition into a disinflation phase. According to the Labor Department’s report on Thursday, the producer price index for final demand increased by a mere 0.1% during the previous month. Over the 12 months leading up to June, the PPI experienced a meager 0.1% gain. This marks the smallest year-on-year increase since August 2020 and follows a 0.9% rise in May. These findings align with recent data from Wednesday, which revealed a slight increase in consumer prices for June. The overall trend suggests that inflation is subsiding as supply chain bottlenecks gradually dissipate and demand for goods slows down in response to higher interest rates. Going forward, investors would put their attention over the upcoming economic data and speeches from the Fed’s official in order to scrutinize how high the interest rate would go.
CrudeOIL
Crude oil prices extended its gains throughout the week and ended the last week’s trading session at $75.25 per barrel. Overall, the oil prices were buoyed by a significant decline in the value of the U.S. dollar against major currencies. Last week, the dollar was basically in a strong downtrend as both CPI and PPI data showed further signs of slowing inflation. With that, it slashed the possibility of more than two times of rate hikes before the end of year 2023. Hence, the black commodity managed to extend its luster with the backdrop of weaker dollar. Despite, the unexpected stockpile in the US oil inventories surprised the market participants, which has limited the gains of the oil prices.
Weekly Outlook: July 17 – July 21
For the week ahead, investors would continue to focus on crucial event such as Retail Sales this week in order to determine further direction. Besides that, the tensions between the US and China 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: July 17 – 21
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 17th July 2023 | |||||
| 10:00 | CNY | GDP (YoY) (Q2) | – | 7.3% | 4.5% |
| 10:00 | CNY | Industrial Production (YoY) (Jun) | – | 2.7% | 3.5% |
| 20:30 | USD | NY Empire State Manufacturing Index (Jul) | – | 0.0 | 6.0 |
| Tuesday –18th July 2023 | |||||
| 20:30 | USD | Retail Sales (MoM) (Jun) | – | 0.5% | 0.3% |
| 22:00 | USD | Fed Vice Chair for Supervision Barr Speaks | – | – | – |
| Wednesday – 19th July 2023 | |||||
| 04:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | 3.026M |
| 14:00 | GBP | CPI (YoY) (Jun) | – | 8.2% | 8.7% |
| 17:00 | EUR | CPI (YoY) (Jun) | – | 5.5% | 6.1% |
| 20:30 | USD | Building Permits (Jun) | – | 1.495M | 1.496M |
| 22:30 | CrudeOIL | Crude Oil Inventories | – | -0.905M | 5.946M |
| Thursday – 20th July 2023 | |||||
| 20:30 | USD | Initial Jobless Claims | – | 243K | 237K |
| 20:30 | USD | Philadelphia Fed Manufacturing Index (Jul) | – | -9.7 | -13.7 |
| 22:00 | USD | Existing Home Sales (Jun) | – | 4.23M | 4.30M |
| Friday –21st July 2023 | |||||
| 07:30 | JPY | National Core CPI (YoY) (Jun) | – | 3.3% | 3.2% |
Risk Statement:
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