19 July 2021                            Weekly Analysis

 

GCMAsia Weekly Report: July 19 – 23

Market Review (Forex): July 12 – 16

US Dollar

The dollar index which traded against a basket of six major currency pairs surged over the backdrop of a string of upbeat economic data from the region of United States last week, which dialed up the market optimism toward the economic progression, which spurring hopes that the Federal Reserve would start to taper its bond purchasing program while scaling back its massive asset purchases to combat high inflation risk in future. Nonetheless, the gains experienced by the US Dollar was limited amid the dovish statement from the Federal Reserve. The Dollar Index was closing its price on last Friday session at the price of 92.70.

 

On the US economic data front, most of the crucial economic data from the United States was came in at positive reading. According to U.S. Bureau of Labor Statistics, U.S. Core Consumer Price Index (CPI) MoM notched up significantly from the previous reading of 0.7% to 0.9%, exceeding the market forecast at 0.4%. Meanwhile, U.S. Producer Price Index (PPI) increased from the previous reading of 0.8% to 1.0%, which also higher than the market expectation at 0.6%. High inflation data would cause the Federal Reserve to contract its monetary policy, which diminishing the money circulation in the financial market while increasing the appeal of the US Dollar.  Nonetheless, the gains experienced by the US Dollar was limited following the Federal Reserve unleashed their dovish tone on last week, despite high inflation data was released. According to Reuters, Federal Reserve Chair Jerome Powell claimed that the U.S. economy was still a way offs from levels of the central bank’s goal before tapering its monetary support. Hence, some market participants still speculated that the Fed would continue to implement its expansionary monetary policy in long-term basis to boost back the economic momentum.

 

Despite that, the overall statement from the Federal Reserve as for now remained vague. Hence, investors would be suggested to remain their focus toward the future economic data, Fed’s monetary policy as well as the Covid-19 development in order to gauge the likelihood movement for the US Dollar.

USD/JPY

The pair of USD/JPY received bearish momentum on last week while ending last Friday session at the price of 109.85. The spiking numbers of the Delta variant and the implementation of Covid-19 restriction in Asia region had insinuated risk-off sentiment in the FX market, which prompting investors to shift their portfolio toward the safe-haven Japanese Yen.

 

EUR/USD

The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.1800. The overall bearish momentum for the pair of EUR/USD was mainly due to the appreciation of US Dollar. Nonetheless, due to lack of market catalyst, the overall momentum for the pair of Euro remained subdued. Investors would continue to scrutinize the further economic data as well as Covid-19 development in European region to gauge the likelihood movement for the currency.

 

GBP/USD

The pair of GBP/USD was slumped on last week while closing its market price at 1.3760. The Pound Sterling received huge bearish momentum last week amid the high Covid-19 cases in U.K. According to statistics from British government, U.K. records another 48,161 recent high cases of Covid-19 on Sunday, an increase of almost 36% from previous month. Market participants fears that the Covid-19 infections could be continuing to surge higher following all the lock-down restrictions were eased. According to CNN, almost all restrictions in England will be lifted as of Monday. Mandatory mask wearing will be gone, and venues like nightclubs and sports stadium will be free to open at full capacity. As for now, investors would focus on the Covid-19 development in U.K. to receive further trading signal.

 

Market Review (Commodities): July 12 – 16

GOLD

Gold price slumped tremendously last week with the price of $1880.00 per troy ounce following the United States released upbeat economic data, which spurring hopes that the Federal Reserve might start to reduce its massive monetary policy to combat the high inflation risk. Contractional monetary policy would normally reduce the money circulation in the financial market, which spurring value of the currency while diminishing market demand on the commodity gold. Nonetheless, the losses experienced by the safe-haven gold was limited amid fears of rising inflation and Covid-19 cases in the world, which increasing the appeal of the safe-haven gold.

 

CrudeOIL

The price of crude oil slumped significantly last week while closing last Friday session with the price of $70.35 per barrel amid the spiking numbers of the Covid-19 cases in Asia region had diminished the appeal of the crude oil demand. According to The StraitsTimes, Taiwan, Thailand, Vietnam and Malaysia have been seeing a sudden surge in cases in recent weeks. Besides, on the supply front, OPEC and its allied nations have agreed on Sunday to boost oil supply from August to cool prices which have climbed to 2-year suddenly highs as the global economy start to recover from Covid-19 pandemic. Nonetheless, the losses experienced by the crude oil commodity was limited over the backdrop of upbeat inventory data from EIA last week. According to Energy Information Administration (EIA), the U.S Crude Oil inventories came in at -7.897M, less than the market forecast at -4.359M.

 

Weekly Outlook: July 19 – 23

For the week ahead, investors would continue to focus on crucial economic data such as German GDP 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: July 19 – 23

Time Market Event Actual Forecast Previous
Monday – 19th July 2021
N/A
Tuesday – 20th July 2021
20:30   USD Building Permits (Jun) 1.700M 1.683M
Wednesday – 21st July 2021
09:30   AUD Retail Sales (MoM) -0.50% 0.40%
22:30   USD Crude Oil Inventories -4.359M -7.897M
Thursday – 22nd July 2021
19:45   EUR ECB Monetary Policy Statement
19:45   EUR ECB Interest Rate Decision (Jul) 0.00% 0.00%
20:30   USD Initial Jobless Claims 350K 360K
20:30   EUR ECB Press Conference
22:00   USD Existing Home Sales (Jun) 5.90M 5.80M
Friday – 23rd July 2021
14:00   GBP Retail Sales (MoM) (Jun) 0.50% -1.40%
15:30   EUR German Manufacturing PMI (Jul) 64.1 65.1
16:30   GBP Manufacturing PMI 62.7 63.9
16:30   GBP Services PMI 62 62.4
20:30   CAD Core Retail Sales (MoM) (May) -2.00% -7.20%