18 April 2022 Weekly Analysis
GCMAsia Weekly Report: April 18 – 22
Market Review (Forex): April 11 – 15
US Dollar
The Dollar Index which traded against a basket of six major currencies received significant bullish momentum last week amid the backdrop of hawkish tone from Federal Reserve. Besides, the gains of US Dollar was extended following the rising tensions between Russia-Ukraine. The Dollar Index has closed its market price at 100.30.
Last week, the US Dollar index extended its gains following the rising U.S. Treasury yields and expectations for more aggressive monetary policy tightening by the Federal Reserve. According to Reuters, St. Louis Fed President James Bullard stated that the central bank needs to increase their interest rates by another 3% by year end. The benchmark 10-year Treasury yield rose significantly to 2.77%. Recently, the Treasury yields have been on extend its bullish trend recently, with concerns that the rising inflation rate would prompt the Federal Reserve to announce a more aggressive contractionary monetary policy. Market participants have raced to price in the risk of larger rate hike from Federal Reserve with implying the rises of 50 basis point during both May and June monetary meeting. Besides, according to US Bureau of Labor Statistics, the US Consumer Price Index (CPI) climbed at their highest rates since 1981, increasing 8.5% over the year to the end of March as rising tensions between Russia-Ukraine continue to drive up energy costs. The Federal Reserve Governor Lael Brainard also reiterated that the Federal Reserve would likely to conduct a series of rate hikes and begin to reduce its massive bond buying program as soon as June to combat the high inflation rate, prompting investors to shift their capitals toward safe-haven Dollar which having better prospects.
Besides, the rising tension of Russia-Ukraine conflict had also spurred further upward momentum on US Dollar. According to CNBC, the Russian missile cruiser Moskva was set aflame and evacuated after suffering a Ukrainian missile attack in the Black Sea, according to Ukrainian authorities. Meanwhile, US President Joe Biden announced another $800 million in weaponry for Ukraine on 13 April, following an hour-long phone call with the country’s president, Volodymyr Zelenskyy. On the other hand, President Vladimir Putin appeared a speech on 12 April, which claimed that the peace talks with Ukraine had hit a dead end, using his first public comments on the conflict in more than a week to vow his troops would win and to goad the West for failing to bring Moscow to heel. The rising tensions of Russia-Ukraine conflict would likely to disrupt global supply chain, including commodities market, dialed down the market optimism toward economic progression of global and prompting market participants to purchase safe-haven assets such as US Dollar.
USD/JPY
The pair of USD/JPY extended its gains last week while closing its market price at 126.36. The pairing received bullish momentum amid the backdrop of Bank of Japan (BoJ) remained its dovish tone, as it was committed to keeping monetary policy loose, and it had made two offers to buy an unlimited amount of government bonds with maturities of more than five years and up to 10 years. Besides, the rate hike decision from Federal Reserve had brought positive prospects upon US Dollar, prompting investors to selloff Yen and purchase US Dollar which having better prospects, spurring further bullish momentum on the pair.
EUR/USD
The pair of EUR/USD slumped last week while closing its market price at 1.0809. The Euro received bearish momentum following the rising tensions between Russia-Ukraine. Russia invasion of Ukraine would lead to the disruption of global supply chain, including commodities market, causing the commodities price such as crude oil to spike. The surge of crude oil price would bring negative prospects toward economic progression in Europe region by increasing the import cost of companies, dialing down the market optimism toward economic prospects in Europe. It prompted investors to shift their capitals toward other currencies such as US Dollar. Besides, Euro received further bearish momentum over the backdrop of dovish tone from European Central Bank. According to Reuters, the European Central Bank President Christine Lagarde claimed that currently the European Central Bank was still in no rush to increase interest rates, in contrast with an aggressive contractionary monetary policy from US Federal Reserve.
GBP/USD
The pair of GBP/USD appreciated last week while ending last week session at the price of 1.3062. The Pound received bullish momentum last week following the expectation of rate hike from Bank of England. According to Office of National Statistics, U.K. Consumer Price Index (CPI) YoY notched up from the previous reading of 6.2% to 7.0%, exceeding the market forecast of 6.7%. The Consumer Price Index was used as a indicate the rate of inflation. The higher inflation rate sparked hopes upon the rate hike from Bank of England to combat inflation risk, dialed up the market optimism toward Pound. Nonetheless, the gains experienced by Pound was limited amid the hawkish statement from Federal Reserve. The implementation of aggressive tightening monetary policy by Federal Reserve would diminish the US Dollar circulation in the market, prompting investors to shift their capitals toward US Dollar and selloff other currencies such as Pound.
Market Review (Commodities): April 11 – 15
GOLD
Gold price rallied last week while closing its market price at $1972.50 per troy ounces. Gold price received bullish momentum last week following the rising tension between Russia-Ukraine. As Russia was keeping its invasion on Ukraine, it would likely to cause the disruption of global supply chain, led to the spike of inflation risk. It prompted investors to shift their capitals toward inflation-hedged assets such as gold in order to avoid the depreciation of their capitals. Besides, US President Joe Biden claimed that he would provide military support to Ukraine, hinted that the war would not end soon enough, spurring further bullish momentum on gold price.
CrudeOIL
Crude oil price appreciated while ending last week session at the price of $106.51 per barrel. Crude oil price received bullish momentum amid the backdrop of the sanction expectation on Russia oil. According to Reuters, the market weighed the potential for more sanctions on Russia’s energy sector. The European Union is drafting proposals for an EU oil embargo on Russia in the wake of its invasion of Ukraine. Nonetheless, OPEC warned it would be impossible to increase output enough to offset lost supply. On the other hand, the rising tensions between Russia-Ukraine would likely to cause the graver disruption of global supply chain, including commodities such as crude oil, spurring further bullish momentum on oil price.
Weekly Outlook: April 18 – 22
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: April 18 – 22
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 18th April 2022 | |||||
| All Day | GBP | United Kingdom – Easter | – | – | – |
| All Day | EUR | Germany – Easter | – | – | – |
| All Day | CHF | Switzerland – Easter | – | – | – |
| All Day | EUR | Italy – Easter | – | – | – |
| All Day | EUR | France – Easter | – | – | – |
| All Day | EUR | Spain – Easter | – | – | – |
| All Day | AUD | Australia – Easter | – | – | – |
| All Day | HKD | Hong Kong – Easter | – | – | – |
| All Day | NZD | New Zealand – Easter | – | – | – |
| 10:00 | CNY | GDP (YoY) (Q1) | – | 4.40% | 4.00% |
| 10:00 | CNY | Industrial Production (YoY) (Mar) | – | 4.50% | 7.50% |
| Tuesday – 19th April 2022 | |||||
| 9:30 | AUD | RBA Meeting Minutes | – | – | – |
| 20:30 | USD | Building Permits (Mar) | – | 1.830M | 1.865M |
| Wednesday – 20th April 2022 | |||||
| 9:15 | CNY | PBoC Loan Prime Rate | – | – | 3.70% |
| 20:30 | CAD | Core CPI (MoM) (Mar) | – | – | 0.80% |
| 22:00 | USD | Existing Home Sales (Mar) | – | 5.80M | 6.02M |
| 22:30 | USD | Crude Oil Inventories | – | 0.863M | 9.382M |
| Thursday – 21th April 2022 | |||||
| 6:45 | NZD | CPI (QoQ) (Q1) | – | 2.00% | 1.40% |
| 9:30 | AUD | Retail Sales (MoM) (Mar) | – | 1.00% | 1.80% |
| 17:00 | EUR | CPI (YoY) (Mar) | – | 7.50% | 7.50% |
| 20:30 | USD | Initial Jobless Claims | – | 175K | 185K |
| 20:30 | USD | Philadelphia Fed Manufacturing Index (Apr) | – | 20 | 27.4 |
| Friday – 22th April 2022 | |||||
| 0:30 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 1:00 | USD | Fed Chair Powell Speaks | – | – | – |
| 1:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 14:00 | GBP | Retail Sales (MoM) (Mar) | – | -0.30% | -0.30% |
| 15:30 | EUR | German Manufacturing PMI (Apr) | – | 54.4 | 56.9 |
| 16:30 | GBP | Manufacturing PMI | – | – | 55.2 |
| 16:30 | GBP | Services PMI | – | – | 62.6 |
| 20:30 | CAD | Core Retail Sales (MoM) (Feb) | – | 2.40% | 2.50% |
| 21:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 22:30 | GBP | BoE Gov Bailey Speaks | – | – | – |
Risk Statement:
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