18 January 2021 Weekly Analysis
GCMAsia Weekly Report: January 18 – 22
Market Review (Forex): January 11 – 15
US Dollar
The dollar index which traded against a basket of six major currency pairs have soared throughout the previous week and closing last Friday session with the price of 90.70. Despite with mixed result on most economic data, optimism on COVID-19 vaccine and record high of U.S treasury yields become the major catalyst for the greenback.
On data front, U.S CPI rose by 0.4% while core CPI increase by a modest 0.1%. However, various data on second half of the week was disappointing where key stats such as weekly jobless claims, retail sales and consumer sentiment figures came out lower than expected. Jobless claims jumping from 784K to 965K while retail sales falling 0.7%. Michigan Consumer Sentiment also fell to 79.2 which is lower than market expectation of 80.0. On top of that, the Fed also provide some dovish remarks and assured the market that the rates would not going up anytime soon. Still, the downside was limited following the support from ongoing optimism on COVID-19 vaccines and unexpected record high of treasury yields. The U.S. Treasury 10-year yield settled at 1.15% on Jan. 12, up 19 basis points from Jan. 5, when Democrats won the races for Georgia’s two Senate seats and tilted the balance of Congress. The winning of Democrats in senate seats also provide further boost for the greenback where U.S President-elect Joe Biden is expected to propose a bigger stimulus measure that worth $1.9 trillion to help the economy.
With the Inauguration Day happening on the upcoming week, all eyes will be focused on the event where it could potentially trigger volatility on the market. At the same time, investors will also monitor on the development of vaccine and COVID-19 cases to gauge the condition and determine further direction for the greenback.
USD/JPY
The pair of USD/JPY was traded steadily in overall but still ended the week with a loss at the price of 103.85. On data front, core machinery orders rose by 1.5% in November, better than market expectation of -6.2. On top of that, Japan’s PPI also improved to 0.5% against market expectation of 0.2%. U.S politics and COVID-19 also added further influence on the sentiment.
EUR/USD
EUR/USD have given up its previous gains and traded lower throughout the week while closing with the price of 1.2064. It was a mixed bag of results on economic data but remarks from ECB and rising COVID-19 cases in EU exert pressure for the pair. Eurozone industrial production jumped by 2.5% in November, higher than market expectation of 0.2%. On the opposite side, trade balance disappoints with the reading of 25.8B against market expectation of 26.0B. ECB President Lagarde continued to stand by the ECB’s economic forecasts, despite with the extended lockdown measures in the EU. Lagarde pointed out that the forecasts had factored in lockdowns through the 1st quarter. At the same time, a continued spike in new COVID-19 cases also weigh heavily on the pair where most of the EU countries already imposed strictest lockdowns due to unrelentless spread of COVID-19.
GBP/USD
The pair of GBP/USD have traded higher throughout the first half of the week, but gave up most of its gains at the end of the week while closing with the price of 1.3583. Most of its data were skewed to the negative. U.K GDP fell to -2.6% compared to previous reading of 0.4%. Industrial Production also disappoints with the reading of -0.1% against 0.5% expectation while Manufacturing Production came in at 0.7%, lower than market expectation of 0.9%. Away from economic calendar, a pickup in vaccination rates in the U.K help offset some of the negative sentiment.
Market Review (Commodities): January 11 – January 15
GOLD
Gold price remain traded in a tight range last week but still ending the week with a loss at the price of 1828.31 a troy ounce. The yellow metal experienced a choppy week as market facing difficulties to digest conflicting themes such as high U.S yields and surging coronavirus last week which failed to provide a clear direction. Ultimately, the strength of the greenback on Friday which caused huge fall for the safe-haven metal as the price of the gold is negatively correlated with the greenback.
CrudeOIL
The price of crude oil was traded lower and settled with a loss last week, closing with the price of $52.12 per barrel. Following news of rising COVID-19 cases and lockdowns in China and other countries, the prospect of recovery in demand was once again affected.
China ramped up lockdowns on Friday after reporting the highest number of daily Covid-19 cases in more than 10 months. The world’s No. 2 economy capped a week that has resulted in more than 28 million people under lockdown as it suffered its first coronavirus death on the mainland since May. At the same time, concerns over long duration of lockdown in EU and new lockdowns that could reduce the demand for fuel consumption also weigh on the commodity. Furthermore, the dollar strength on Friday added more further selling pressure. On data front, U.S crude oil inventories fell by 3.247M against market expectation with the decrease of 2.266M. Still, the upbeat data fail to impress the buyer.
As the Covid-19 pandemic’s taking center stage again, the worsening condition of the COVID-19 may potentially extend further losses for the black commodity while investors continue to monitor for the ongoing development on vaccines and number of cases.
Weekly Outlook: January 18 – January 22
For the week ahead, investors would continue to focus on the developments on U.S politics, developments and impact of coronavirus as well as economic data such as weekly jobless claims to determine further direction.
As for oil traders, they will be also 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 18 – January 22
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 18 January 2021 | |||||
| 21:30 | GBP | BoE Gov Bailey Speaks | – | – | – |
| Tuesday – 19 January 2021 | |||||
| 18:00 | EUR | German ZEW Economic Sentiment (Jan) | – | 60.0 | 55.0 |
| Wednesday – 20 January 2021 | |||||
| 15:00 | GBP | CPI (YoY) (Dec) | – | 0.5% | 0.3% |
| 18:00 | EUR | CPI (YoY) (Dec) | – | -0.3% | -0.3% |
| 21:30 | CAD | Core CPI (MoM) (Dec) | – | – | 0.2% |
| 23:00 | CAD | BoC Monetary Policy Report | – | – | – |
| 23:00 | CAD | BoC Interest Rate Decision | – | 0.25% | 0.25% |
| 23:30 | CrudeOIL | Crude Oil Inventories | – | -2.266M | -3.247M |
| Thursday – 21 January 2021 | |||||
| Tentatif | USD | US President Biden Speaks | – | – | – |
| Tentatif | CAD | BoC Press Conference | – | – | – |
| 08:30 | AUD | Employment Change (Dec) | – | 50.0K | 90.0K |
| Tentatif | JPY | BoJ Monetary Policy Statement | – | – | – |
| Tentatif | JPY | BoJ Outlook Report (YoY) | – | – | – |
| Tentatif | JPY | BoJ Press Conference | – | – | – |
| 17:00 | USD | Philadelphia Fed Manufacturing Index (Jan) | – | 12.0 | 9.1 |
| 20:45 | EUR | ECB Interest Rate Decision (Jan) | – | – | -0.50% |
| 21:30 | USD | Building Permits (Dec) | – | 1.604M | 1.635M |
| 21:30 | USD | Initial Jobless Claims | – | 868K | 965K |
| 21:30 | EUR | ECB Press Conference | – | – | – |
| Friday – 22 January 2021 | |||||
| 05:45 | NZD | CPI (QoQ) (Q4) | – | 0.9% | 0.7% |
| 08:30 | AUD | Retail Sales (MoM) | – | – | 7.1% |
| 15:00 | GBP | Retail Sales (MoM) (Dec) | – | 0.9% | -3.8% |
| 16:30 | EUR | German Manufacturing PMI (Jan) | – | 57.5 | 58.3 |
| 17:30 | GBP | Manufacturing PMI (Jan) | – | 57.3 | 57.3 |
| 17:30 | GBP | Services PMI (Jan) | – | 49.9 | 49.9 |
| 21:30 | CAD | Core Retail Sales (MoM) (Nov) | – | 0.3% | 1.0% |
| 23:00 | USD | Existing Home Sales (Dec) | – | 6.54M | 6.69M |