20 February 2023 Weekly Analysis
GCMAsia Weekly Report: February 20 – 24
Market Review (Forex): February 13 – 17
US Dollar
The Dollar Index which traded against a basket of six major currencies extended its gains throughout the past one week following the data has shown sign of rebound in inflation, which increased the odds of continuous aggressive rate hike path. The Dollar Index has closed its market price at 103.72.
Last week, the dollar index received significant bullish momentum amid the higher-than-expected inflationary data. According to the US Bureau of Labor Statistics, the US Consumer Price Index (CPI) dropped from 6.5% to 6.4% in the month of January on a year-over-year basis, yet it still slightly higher than the economist forecast at 6.2%. Besides that, another inflation report, PPI was also showing that the task for bringing down red-hot inflation was not done yet, with the PPI figures has notched up from the prior reading. With that, it showed that the US inflation is still sticky, whereby it raised the likelihood that the Federal Reserve (Fed) would be necessary to keep the interest rate elevated, at least until the inflation figure shows an obvious drop in the future. After that, Federal Reserve Bank of St. Louis President James Bullard has urged for another 50 basis point rate hike in the March meeting in order to restore price stability. On the other hand, the optimistic economy outlook in the US had also attracted foreign investment into the dollar market. The US retail sales data has out-performed market expectation, which indicated that the retail activities remained active despite the rising inflation pressures. At this juncture, investors would pay more attention on the crucial event and economic data, such as FOMC Meeting Minutes and Gross Domestic Product (GDP).
USD/JPY
The pair of USD/JPY was traded higher last week while closing its market price at 134.25. The Japanese Yen received significant bearish momentum following the bearish economic data has been unleashed. According to Cabinet Office, the Japan Gross Domestic Product (GDP) QoQ came in at the reading of 0.2%, missing the consensus forecast of 0.5%. Following the Japan economic growth for 4th quarter has weakened, the appeal of Japanese Yen was dragged down. In addition, the pairing USD/JPY extended its gains following the strengthening of US Dollar, with the rising expectation of aggressive rate hike move from Fed.
EUR/USD
The pair of EUR/USD edged up last week while closing its market price at 1.0681. The EURUSD received significant bullish momentum following the hawkish statement from the European Central Bank (ECB). According to Reuters, ECB President Christine Lagarde claimed on last Wednesday that the central bank was inclined to increase its rates by 50 basis points in March in order to curb sky-high inflation. Although the Eurozone Consumer Price Index (CPI) started dropping since December 2022, but it still far away from the ECB 2% target. Nonetheless, the gains of Euro was limited over the increasing inflation and the hawkish statement from the US market.
GBP/USD
The pair of GBP/USD edged down last week while ending last week session at the price of 1.2024. The GBPUSD received significant bearish momentum on last week over the rising concern against UK economy. Initially, a series of strong labor market data including a negative changes in unemployment claims for the month of January and a lower unemployment rate of 3.7%, contributed some gains to the pound. However, the fears of investors over the possibility of the UK economy might slip into recession offset the pound’s upside. According to a Reuter’s poll, the UK economy is currently experiencing a recession, while the Monetary Policy Committee (MPC) intending to further increase the interest rate to curb the high inflation pressures. Besides, the easing inflationary risk in the UK has also pressured the value of Pound Sterling. Last week, the UK Consumer Price Index (CPI) YoY for January posted at the reading which lower-than-expected, while it indicated that the slip of goods and services price in the UK, whereas decreasing the likelihood of aggressive rate hike from Bank of England (BoE).
Market Review (Commodities): February 13 – 17
GOLD
Gold prices depreciated while closing its market price at $1837.80 per troy ounces. With the background of rising inflation in the US, it might prompt Fed to implement another hefty rate hike again in the upcoming meeting, says 50 basis point. Thus, it sparked the appeal of US Dollar, as well as causing the gold price to drop. Apart from that, the hawkish statement from Fed’s member has also led the gold price remained in the low level.
CrudeOIL
Crude oil prices plunged while ending last week’s session at the price of $76.45 per barrel. The oil prices experienced huge sell-off pressures throughout the week amid the huge stockpiles in the US oil inventories and the market concern over the impact of an aggressive rate hike in the future. Last week, both the API and EIA oil inventory data showed a significant jump compared to the forecast and prior reading. Besides, a series of stronger-than-expected of economic data deteriorated the market worries over the risk of recession as the still-high inflation figure may urge the Federal Reserve (Fed) to further tighten its monetary policy. However, the losses of the oil prices were limited by positive catalysts such as Russia’s oil cut plan and the reopening of China’s economy.
Weekly Outlook: February 20 – 24
For the week ahead, investors would continue to focus on crucial economic data such as US GDP, Core PCE Price Index 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: February 20 – 24
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 20th February 2023 | |||||
| All Day | CAD | Canada – Family Day | – | – | – |
| All Day | USD | United States – Washington’s Birthday | – | – | – |
| 09:15 | CNY | PBoC Loan Prime Rate | – | 3.65% | 3.65% |
| Tuesday – 21st February 2023 | |||||
| 08:30 | AUD | RBA Meeting Minutes | – | – | – |
| 16:30 | EUR | German Manufacturing PMI (Feb) | – | 47.8 | 47.3 |
| 17:30 | GBP | Composite PMI | – | – | 48.5 |
| 17:30 | GBP | Manufacturing PMI | – | 47.5 | 47.0 |
| 17:30 | GBP | Services PMI | – | 49.2 | 48.7 |
| 18:00 | EUR | German ZEW Economic Sentiment (Feb) | – | 22.0 | 16.9 |
| 21:30 | CAD | Core CPI (MoM) (Jan) | – | 0.2% | -0.3% |
| 21:30 | CAD | Core Retail Sales (MoM) (Dec) | – | -0.1% | -0.6% |
| 23:00 | USD | Existing Home Sales (Jan) | – | 4.10M | 4.02M |
| Wednesday – 22nd February 2023 | |||||
| 09:00 | NZD | RBNZ Interest Rate Decision | – | 4.75% | 4.25% |
| 10:00 | NZD | RBNZ Rate Statement | – | – | – |
| 10:00 | NZD | RBNZ Press Conference | – | – | – |
| 15:00 | EUR | German CPI (YoY) (Feb) | – | 8.7% | 8.7% |
| 17:00 | EUR | German Ifo Business Climate Index (Feb) | – | 91.4 | 90.2 |
| Thursday – 23rd February 2023 | |||||
| All Day | JPY | Japan – Emperor’s Birthday | – | – | – |
| 03:00 | USD | FOMC Meeting Minutes | – | – | – |
| 05:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | 10.507M |
| 18:00 | EUR | CPI (YoY) (Jan) | – | 8.6% | 8.5% |
| 21:30 | USD | GDP (QoQ) (Q4) | – | 2.9% | 2.9% |
| 21:30 | USD | Initial Jobless Claims | – | 200K | 194K |
| Friday – 24th February 2023 | |||||
| 00:00 | CrudeOIL | Crude Oil Inventories | – | 1.166M | 16.283M |
| 15:00 | EUR | German GDP (QoQ) (Q4) | – | -0.2% | -0.2% |
| 21:30 | USD | Core PCE Price Index (MoM) (Jan) | – | 0.4% | 0.3% |
| 23:00 | USD | New Home Sales (Jan) | – | 619K | 616K |
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