19 September 2022 Weekly Analysis
GCMAsia Weekly Report: Sept 19 – 23
Market Review (Forex): September 12 – 16
US Dollar
The Dollar Index which traded against a basket of six major currencies surged significantly last week over the backdrop of spiking inflation data, prompting further bets for a more aggressive rate hike from Federal Reserve in future to combat elevated inflation while sending the short-term US Treasury Yield to extend its gains. The Dollar Index has closed its market price at 109.35.
On the economic data front, the US Core Consumer Price Index (CPI) for last month notched up significantly from the previous reading of 0.3% to 0.6%, exceeding the market forecast at 0.3%. Meanwhile, the US Initial Jobless Claims came in at 213K, which also fared better than the market expectation at 226K, according to Department of Labor. The recent data had indicated that the inflation level have continue to creep upward, coupled with the vast improvement in employment market in US on the back of strong economic growth, which would likely to increase the speculation for a more hawkish tone from Federal Reserve during the FOMC meeting next week. Currently, the financial market had fully priced in an interest rate hike for at least 75 basis point during the FOMC meeting next week, with another 18%% probability of 100 basis point rate hike, according to CME’s FedWatch Tool. On the other hand, the US stock market tumbled significantly last week as rising US Treasury yield continue to weigh down the appeal for the equity market, which stoked a shift in sentiment toward other less risky US-Denominated bond.
Nonetheless, the gains experienced by the US Dollar was limited as investors started to profit-taking from US Dollar ahead of crucial FOMC meeting, prompting the US Dollar to retreat from its recent high. In fact, some economists forecasted that the US Inflation rate would likely to decline from a 40-year high during the next financial quarter as the easing price for commodies product (CrudeOIL) would likely to diminish the inflation risk. Such development would bring some relief to Federal Reserve who have been worrying that the highest inflation in 40 years, which might continue to jeopardize the US economic growth. As for now, the investors would continue to scrutinize the latest updates with regards of the Fed’s monetary policy decision on coming Thursday to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY retreated last week while closing its market price at 142.90. The Japanese yen appeared to rebound from the 24-year low as rising expectation upon the currency intervention from Bank of Japan. Recently, the Japanese Yen has depreciated by nearly 30% this year following the Bank of Japan (BoJ) continue to maintain its ultra-loose monetary policy, in contrast with its global peers, which threatening the importing activity in Japan region. Hence, the Bank of Japan (BoJ) plausible to conduct a rate check with banks in apparent preparation to stabilize the significant depreciation from Japanese Yen, according to Reuters. Though, the Finance Minister Shunichi Suzuki claimed that the authorities would make no advance announcement of plans to intervene, heightens uncertainty for firms and traders in making investment decision. Market participants will be on high alert for the currency intervention decision from Bank of Japan to receive further trading signal for Japanese Yen.
EUR/USD
The pair of EUR/USD depreciated last week while closing its market price at 1.0010. The overall bearish trend for the pair of EUR/USD was mostly due to the strengthening US Dollar. Nonetheless, the mid-term prospect for the Euro could skew to positive amid the expectation upon the contractionary monetary policy from European Central Bank in long-term basis. Earlier, the European Central Bank had delivered two oversized rate hikes decision in July and September and promised even more tightening to stabilize the inflation rate. Indeed, the chairman of the ECB Christine Lagarde also revealed that the tightening path would be remained unchanged, where more rate hikes could be expected in the near-term future to cool down the overheating economy.
GBP/USD
The pair of GBP/USD depreciated last week while ending last week session at the price of 1.1418. The pair of GBP/USD slumped to its lowest level since 1985 following the United Kingdom released a string of downbeat economic data last week. According to the Office for National Statistics, UK Retail Sales for last month notched down significantly from the preliminary reading of 0.4% to -1.6%, missing the market forecast at -0.5%. Meanwhile, the UK Consumer Price Index (CPI) came in at only 9.9%, which also lower than the market expectation at 10.2%. Such downbeat economic data had indicated that the economy in United Kingdom would be expected to enter a recession cycle for an extended period, which reducing the odds for an aggressive rate hike from Bank of England in future and dragging down the appeal for the Pound Sterling.
Market Review (Commodities): September 12 – 16
GOLD
Gold price depreciated last week while closing its market price at $1715.99 per troy ounces. The overall momentum for the gold price hovered below its crucial support level as a series of sharp rate hike expectation from Federal Reserve had sent the US Treasury yield to rise significantly last week, prompting investors to shift their portfolio into US Treasury bond to generate greater risk-free return while diminishing the appeal for the safe-haven gold. For the time being, market participants will be on high alert toward the monetary policy decision from Federal Reserve to determine the pace of contractionary monetary policy in future.
CrudeOIL
Crude oil price surged while ending last week session at the price of $86.00 per barrel. The crude oil price was edged lower last week amid the surge in greenback value urged the non-US oil buyer to temporarily shy away from the black commodity as a more expensive price compared to usual. Besides that, the crude oil price extends its losses over the backdrop of oil inventory data. According to Energy Information Administration (EIA), the US Crude Oil Inventories came in at 2.442M, higher than the market forecast at 0.833M.
Weekly Outlook: September 19 – 23
For the week ahead, investors would continue to focus on crucial event such as the FOMC meeting this week 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: September 19 – 23
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 19th September 2022 | |||||
| All Day | JPY | Japan – Respect for the Aged Day | – | – | – |
| All Day | GBP | United Kingdom – Bank Holiday | – | – | – |
| 11:00 | NZD | RBNZ Gov Orr Speaks | – | – | – |
| Tuesday – 20th September 2022 | |||||
| 9:30 | AUD | RBA Meeting Minutes | – | – | – |
| 20:30 | USD | Building Permits (Aug) | – | 1.610M | 1.685M |
| 20:30 | CAD | Core CPI (MoM) (Aug) | – | – | 0.50% |
| Wednesday – 21st September 2022 | |||||
| 1:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 4:30 | USD | API Weekly Crude Oil Stock | – | – | 6.035M |
| 22:00 | USD | Existing Home Sales (Aug) | – | 4.70M | 4.81M |
| 22:30 | USD | Crude Oil Inventories | – | 0.833M | 2.442M |
| Thursday – 22nd September 2022 | |||||
| 2:00 | USD | FOMC Economic Projections | – | – | – |
| 2:00 | USD | FOMC Statement | – | – | – |
| 2:00 | USD | Fed Interest Rate Decision | – | 3.25% | 2.50% |
| 2:30 | USD | FOMC Press Conference | – | – | – |
| Tentative | JPY | BoJ Monetary Policy Statement | – | – | – |
| 14:30 | JPY | BoJ Press Conference | – | – | |
| 15:30 | CHF | SNB Interest Rate Decision (Q3) | – | 0.50% | -0.25% |
| 15:30 | CHF | SNB Monetary Policy Assessment | – | – | – |
| 16:00 | CHF | SNB Press Conference | – | – | – |
| 19:00 | GBP | BoE Interest Rate Decision (Sep) | – | 2.25% | 1.75% |
| 19:00 | GBP | BoE MPC Meeting Minutes | – | – | – |
| 20:30 | USD | Initial Jobless Claims | – | 218K | 213K |
| Friday – 23rd September 2022 | |||||
| All Day | JPY | Japan – Public Holiday | – | – | – |
| 15:30 | EUR | German Manufacturing PMI (Sep) | – | 48.3 | 49.1 |
| 16:30 | GBP | Composite PMI | – | – | 49.6 |
| 16:30 | GBP | Manufacturing PMI | – | – | 47.3 |
| 16:30 | GBP | Services PMI | – | – | 50.9 |
| 20:30 | CAD | Core Retail Sales (MoM) (Jul) | – | -1.10% | 0.80% |
Risk Statement:
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