19 June 2023 Weekly Analysis
GCMAsia Weekly Report: June 19 – 23
Market Review (Forex): June 12 – 16
US Dollar
The Dollar Index, which is traded against a basket of six major currencies, lost its ground and hit 6 weeks low amid further easing of inflationary pressures in the US, despite hawkish statements were given by the Fed Chairman Jerome Powell.
Earlier last week, the dollar index slumped as the US inflation rate dropped from 4.9% to 4.0% in May, lower than the market consensus at 4.1%. As a result, the market participants were expecting the Fed to leave the interest rate at the current level, with no any changes in FOMC meeting. Following with that, the probability of maintaining the interest rate was at 96.5%, whereas the likelihood of another 25 basis points a rate hike was at 3.5% only, according to the CME FedWatch Tool. With the decent drop in the inflation data, majority of the investors bet the Fed’s members to be tilted dovish in the FOMC meeting.
However, the result of the Fed meeting was against the market expectation, where the Fed Chairman gave hawkish view regarding the path of monetary policy. In the meeting, the Fed unanimously decided to hold its interest rate at 5.25% as there were some progress in curbing the inflation. But, the Fed’s chairman Jerome Powell expressed optimism over their effort on cooling down the inflation in the FOMC Press Conference, where he pointed that the inflationary pressure in the US is meaningfully below trend. However, the Fed predicted that they will still increase the interest rate by twice where the terminal rate would eventually reach 5.6% before 2024. Also, Jerome Powell also said that he does not see a rate cut until inflation comes down meaningfully and significantly. He highlighted that none of the member was considering a rate cut by this year. After all, the investors were anticipating a 61.5% chance of the Fed hiking rate by a quarter point in the next meeting, according to the CME FedWatch Tool.
Later of the week, the downbeat US economic data triggered another round of sell-off in the market. Last Thursday, the US reported that the number of American who filed for unemployment claims remained at 262K, far above the market expectations of 249K, showing the labor market in the US remained fragile. Besides, the Philadelphia Fed Manufacturing Index for the month of June came in at -13.7, slightly below the market forecast at -13.5. It was the 10th consecutive negative reading, where the current activity and new orders remained negative.
Going forward, the investors are still eyeing on the Fed monetary policy, which is data-dependent, where no any answer of continuing interest rate skip or further rate hike at this point in time.
USD/JPY
The pair of USD/JPY was traded higher last week while closing its market price at 141.50. The bearish momentum was mainly attributed to the weakness of the Japanese yen. Last week, the Japanese yen were remained week in overall as the Bank of Japan highlighted that they would rather carry too much of monetary easing than too little. In the BoJ meeting, the board of members decided to hold its interest rate at -0.10%, showing an obvious divergence of monetary policy style against other countries. Despite the high inflation in japan, the BoJ governor Ueda said that the cost-push inflation is out of central bank control, where central bank cannot do much on that.
EUR/USD
The pair of EUR/USD jumped last week while closing its market price at 1.0935. The EURUSD received significant bullish momentum after the ECB decided to increase its interest rate by 25 basis points to 3.5%, diverging from the Fed interest rate decision to pause its rate hike last Thursday. Besides, the latest ECB announcement followed by the interest rate decision was hawkish, where the ECB chairman Christine Lagarde said they are not thinking about pausing rate hike while they are not satisfied with the inflation outlook also. As a result, the investors chose to move their capital from the US dollar to euro market.
GBP/USD
The pair of GBP/USD extended its gains last week while ending last week’s session at the price of 1.2820. The GBPUSD received significant bullish momentum last week as the downbeat economic data in the US diminished the appeal of the dollar while lifting the attraction of the pound. Besides, with the still-high inflation in the UK, majority of the investors are expecting the Bank of England (BoE) to increase the interest rate further in the future.
Market Review (Commodities): June 12 – 16
GOLD
Gold prices seesawed while closing its market price at $1955.00 per troy ounce. Last week, the major events which created huge volatility in the market were the meeting from both Fed and ECB. The gold prices slumped initially as the Fed’s chairman Jerome Powell expressed optimism over their effort on cooling down the inflation in the FOMC Press Conference, where he pointed that the inflationary pressure in the US is meaningfully below trend. However, the Fed predicted that they will still increase the interest rate by twice where the terminal rate would eventually reach 5.6% before 2024. Also, Jerome Powell also said that he does not see a rate cut until inflation comes down meaningfully and significantly. He highlighted that none of the member was considering a rate cut by this year. Then, the ECB hawkish statement has lifted the value of the gold prices indirectly. The signal of no-stop in rate hike by the ECB continued to support the value of euro while slashed the appeal of the dollar index.
CrudeOIL
Crude oil prices surged while ending last week session at the price of $71.40 per barrel. The oil prices jumped as stronger Chinese demand and OPEC+ supply cuts lifted prices, despite expected weakness in the global economy and the prospect for further interest rate hikes. China’s refining output rose to its second-highest level on record in May, and the chief executive of Kuwait Petroleum Corp expects Chinese demand to continue to climb in the second half. Besides, the weakness of the dollar index also prompted the investors to rush into the oil market amid cheaper cost.
Weekly Outlook: June 19 – 23
For the week ahead, investors would continue to focus on crucial economic data such as Initial Jobless Claims this week in order to determine further direction. Besides that, the ongoing talk 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: June 19 – 23
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 19th Jun 2023 | |||||
| N/A | |||||
| Tuesday – 20th Jun 2023 | |||||
| 09:15 | CNY | PBoC Loan Prime Rate | – | – | 3.65% |
| 20:30 | USD | Building Permits (May) | – | 1.435M | 1.417M |
| Wednesday – 21st Jun 2023 | |||||
| 14:00 | GBP | CPI (YoY) (May) | – | 8.5% | 8.7% |
| 22:00 | USD | Fed Chair Powell Testifies | – | – | – |
| Thursday –22nd Jun 2023 | |||||
| 04:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | 1.024M |
| 15:30 | CHF | SNB Interest Rate Decision (Q2) | – | – | 1.50% |
| 16:00 | CHF | SNB Press Conference | – | – | – |
| 19:00 | GBP | BoE Interest Rate Decision (Jun) | – | 4.75% | 4.50% |
| 20:00 | GBP | BOE Inflation Letter | – | – | – |
| 20:30 | USD | Initial Jobless Claims | – | – | 262K |
| 22:00 | USD | Existing Home Sales (May) | – | 4.24M | 4.28M |
| 22:00 | USD | Fed Chair Powell Testifies | – | – | – |
| 23:00 | CrudeOIL | Crude Oil Inventories | – | – | 7.919M |
| Friday –23th Jun 2023 | |||||
| 15:30 | EUR | German Manufacturing PMI (Jun) | – | 43.5 | 43.2 |
| 16:30 | GBP | Composite PMI | – | 53.7 | 54.0 |
| 16:30 | GBP | Manufacturing PMI | – | 46.8 | 47.1 |
| 16:30 | GBP | Services PMI | – | 54.7 | 55.2 |
| 21:45 | USD | Manufacturing PMI (Jun) | – | 48.3 | 48.4 |
| 21:45 | USD | S&P Global Composite PMI (Jun) | – | – | 54.3 |
| 21:45 | USD | Manufacturing PMI (Jun) | – | 54.0 | 54.9 |
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