18 October 2021 Weekly Analysis
GCMAsia Weekly Report: October 18 – 22
Market Review (Forex): October 11 – 15
US Dollar
The dollar index which traded against a basket of six major currency pairs retraced from its recent high last week over the backdrop of a string of bearish inflation data, which diminishing hopes toward Federal Reserve to contract their monetary policy. The Dollar Index was closing its price on last Friday session at the price of 93.95.
Last week, the benchmark U.S. 10-year Treasury Yield fell significantly on Thursday as earlier bearish inflation data had eased worries that the Federal Reserve may need to take action earlier than expected to combat high inflation risk. According to U.S. Bureau of Labor Statistics, U.S. Producer Price Index (PPI) for last month notched down from the previous reading of 0.7% to 0.5%, missing the market forecast at 0.6%. Besides, U.S. Core Consumer Price Index (CPI) for last month came in at 0.2%, same with the market forecast at 0.2%. Nonetheless, the losses experienced by the US Dollar was limited following the United States released some upbeat jobs data. According to Department of Labor, U.S. Initial Jobless Claims declined from the previous reading of 329K to 293K, better than the market forecast at 319K. In addition, U.S. Retail Sales for last month came in at 0.7%, exceeding the market forecast at -0.25%. Though, the overall long-term prospect for the US Dollar still remained bullish amid the hawkish expectation from the Federal Reserve. According to Reuters, Federal Reserve officials had discussed a plan to start to slow down their bond buying program as well as tighten the monetary policy in either mid-November during their monetary policy meeting. Economist expect the Fed to announce a plan to taper at the end of its 2nd – 3rd November meeting.
Tightening monetary policy would reduce the money circulation for the US Dollar in global financial market, which spurring bullish momentum for the US Dollar. As for now, it would be crucial for investors to continue to scrutinize the latest updates with regards of the future monetary policy decision from Fed as well as further economic data in order to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY received bullish momentum on last week while ending last Friday session at the price of 112.95. The overall bullish momentum for the pair of USD/JPY last week was mainly due to the depreciation of Japanese Yen. Japanese Yen slumped on last week over the backdrop of downbeat data from Japan region. Ministry of Economy, Trade and Industry (METI) reported had the Japan Industrial Production in August have slumped significantly from the previous reading of -3.2% to -3.6%, which indicating that the industrial output continue to struggle amid the global chip supply shortage.
EUR/USD
The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.1585. The overall momentum for the Euro remained bearish amid market participants speculated the European Central Bank would continue to implement its aggressive expansionary monetary policy to sustain the economic growth. According to Bloomberg, the European Central Bank President Christine Lagarde claimed that the current spike inflation is only transitory while unlikely to last in long-time basis, while vowing to continue aiding the Europe economy as the fallout from the pandemic lingers.
GBP/USD
The pair of GBP/USD had surged last week while closing its market price at 1.3760. Pound Sterling surged last week over the backdrop of upbeat economic data from the U.K. region. According to Office for National Statistics, U.K. Gross Domestic Product (GDP) for last month came in at 6.9%, exceeding the market forecast at 6.7%. Meanwhile, U.K. Manufacturing Production notched up significantly from the previous reading of -0.6% to 0.5%, better than the market forecast at 0.1%. As both crucial economic data had fared better-than-expectation, which spurring positive prospect toward the post-Covid economic recovery from the U.K. region. Nonetheless, the gains experienced by the Pound Sterling was limited by the Brexit uncertainty between UK and European region. As for now, the EU members has repeatedly claimed that they are not willing to renegotiate the Brexit protocol. Investors speculated that the failure of renegotiation would continue to harm the economic momentum in the U.K.
Market Review (Commodities): October 11 – 15
GOLD
Gold price have slumped last week with the price of $1755.50 per troy ounce amid the hawkish expectation from Fed in future continue to diminish the appeal for the safe-haven gold. The overall momentum for the gold remained bearish as market participants predicted that the Federal Reserve might start to taper its monetary policy in November in order to maintain its stable inflation rate in future. Such contractionary monetary policy would reduce the money circulation in the global financial market, which diminishing the inflation risk in future while dragging down the appeal for the safe-haven gold. Nonetheless, the overall statement from the Federal Reserve as for now remained vague, hence investors would continue to scrutinize the latest updates with regards of latest economic data as well as future monetary policy decision to receive further trading signal.
CrudeOIL
The price of crude oil surged significantly last week while closing last Friday session with the price of $83.00. The oil market maintained its bullish trend amid easing Covid-19 cases as well as rapid vaccination program around the world continue to enhance the outlook for this black-commodity. Nonetheless, the gains experienced by crude oil was limited over the backdrop of downbeat inventory data. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories notched up significantly from the previous reading of 2.346M to 6.088M, missing the market forecast at 0.702M.
Weekly Outlook: October 18 – 22
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims 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: October 18 – 22
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 18th October 2021 | |||||
| 10:00 | CNY | GDP (YoY) (Q3) | – | 5.20% | 7.90% |
| 10:00 | CNY | Industrial Production (YoY) (Sep) | – | 4.50% | 5.30% |
| Tuesday – 19nd October 2021 | |||||
| 09:30 | AUD | RBA Meeting Minutes | – | – | – |
| 20:05 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 20:30 | USD | Building Permits (Sep) | – | 1.680M | 1.721M |
| Wednesday – 20nd October 2021 | |||||
| 14:00 | GBP | CPI (YoY) (Sep) | – | 3.20% | 3.20% |
| 17:00 | EUR | CPI (YoY) (Sep) | – | 3.40% | 3.40% |
| 20:30 | CAD | Core CPI (MoM) (Sep) | – | – | 0.20% |
| 22:30 | USD | Crude Oil Inventories | – | 0.702M | 6.088M |
| Thursday – 21st October 2021 | |||||
| 18:00 | EUR | EU Leaders Summit | – | – | – |
| 20:30 | USD | Initial Jobless Claims | – | 303K | 293K |
| 20:30 | USD | Philadelphia Fed Manufacturing Index (Oct) | – | 24.5 | 30.7 |
| 22:00 | USD | Existing Home Sales (Sep) | – | 6.06M | 5.88M |
| Friday – 22nd October 2021 | |||||
| 14:00 | GBP | Retail Sales (MoM) (Sep) | – | 0.40% | -0.90% |
| 15:30 | EUR | German Manufacturing PMI (Oct) | – | 56.9 | 58.4 |
| 16:30 | GBP | Composite PMI (Oct) | – | – | 54.9 |
| 16:30 | GBP | Manufacturing PMI (Oct) | – | – | 57.1 |
| 16:30 | GBP | Services PMI (Oct) | – | – | 55.4 |
| 18:00 | EUR | EU Leaders Summit | – | – | – |
| 20:30 | CAD | Core Retail Sales (MoM) (Aug) | – | 3.00% | -1.00% |