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20 March 2023           Weekly Analysis

 

GCMAsia Weekly Report: March 20 – 24

 

Market Review (Forex): March 13 – 17

US Dollar

The Dollar Index which traded against a basket of six major currencies seesawed throughout the past week as the bank jitters confused the sentiment in US dollar market, while it ended the week at 103.45.

 

Earlier in the week, the banking turmoil in the US urged the market participants to run away from the US dollar market.  The collapse of Silicon Valley Bank (SVB) was like dropping a stun bomb on the market, which indicates that a financial crisis driven by aggressive rate hikes would likely occur.  Besides, the regulators also took control of SVB’s stricken peer Signature Bank.  With that, investors would start to anticipate the likelihood of reducing rate hikes by the Fed in order to avoid economy hard-landing.  The result turned to see a large sell-off in the US dollar market during the earlier days of the week.  However, the sharp rebound was experienced by the US dollar after Credit Suisse led the Europe bank rout in renewed SVB fallout.  Last week, Credit Suisse acknowledged “material weakness” in its financial reporting, highlighting that the group failed to identify potential risks to financial statements.  As a matter of fact, the material weakness of the financial report did not really trigger a large sell-off in the market.   However, the European stock market tumbled after the largest investor – Saudi National Bank (SNB) revealed it would not buy more shares in the Swiss bank on regulatory grounds.   With the prospect of no more extra cash would be pumped in by the largest backer, the market fears over the banking sector in the European market heightened, urging investors to rush back into the safe haven dollar.

 

Despite this, the favored situation did not last long as the turmoil in banking prompted the Fed to rewiden its balance sheet, and the upcoming Federal Reserve decision points to more pain ahead for the dollar.  Nonetheless, the market participants are eyeing the Fed’s decision on its rate hike path to gauge the further direction of the dollar index.

 

USD/JPY

The pair of USD/JPY enlarged its losses last week while closing its market price at 131.80. The pairing hammered by the market’s dovish bet, where the market participants are largely expecting the Fed to maintain the cash rate at the current level, or even cut it by 25 basis point in the upcoming Fed’s meeting with an aim to save the banking sector in the US. Besides, the new US funding facility, which aimed to support the banking sector, is also weighing on the USD/JPY as it rewidened the US balance sheet.

 

EUR/USD

The pair of EUR/USD seesawed last week while closing its market price at 1.0665.   Earlier of the week, the single currency of the European Union plunged after the largest investor of Credit Suisse – Saudi National Bank (SNB) revealed that it would not buy more shares in the Swiss bank on regulatory grounds.   With the prospect of no more extra cash would be pumped in by the largest backer, the market fears over the banking sector in the European market heightened, urging investors to run away from the euro financial market.   Following that, the single currency managed to regain its luster after the market started to price in the possibility of pausing rate hikes by the Federal reserve.   On top of that, the 50-basis point of a rate hike and also the hawkish statement from the ECB buoyed the value of the single currency during the latter of the week.

 

GBP/USD

The pair of GBP/USD posted some gains last week while ending last week’s session at the price of 1.2177.  Similarly, the gains of the pairing were found from the weakness of the dollar index, especially after the banking turmoil of the SVB’s fallout.  However, it is noteworthy to highlight that the gains of GBP were far larger than the Euro in the midst of the dollar’s weakness as there is no banking turmoil happening in the UK at the moment.

 

Market Review (Commodities): March 13 – 17

GOLD

The gold price skyrocketed throughout the week while closing its market price at $1987.50 per troy ounce. The rally of the gold price was extended sharply after the fallout of banks in the US and EU. Credit Suisse and First Republic Bank unnerved markets, fearing contagion and adding to fears of an impending recession due to the impact of tighter monetary policy. Besides, the market participants also priced in the possibility of a pause in rate hikes by the Fed in the upcoming meeting following the fallout of SVB and Signature Bank, which caused the equity market to tumble significantly in the past one week.

 

CrudeOIL

Crude oil prices plummeted throughout the week and ended last week at $66.50 a barrel. Last week, the crude oil market posted a big weekly loss amid the fears of market participants against the banking sector. The downward pressures stemmed from the persistent market worries over the banking contagion, which coaxed the investors to run away from the black commodity market amid cloudier prospect in the oil market. In the midst of the steep drop in the oil market, a talk in regard to increasing the oil market stability between Russia and Saudi Arabia failed to calm the market, as no decision had been made following the meeting.

 

Weekly Outlook: March 20 – 24

For the week ahead, investors would continue to focus on crucial event such as Federal Reserve Meeting this week in order to determine further direction. Besides that, the ongoing banking turmoil in the US and EU 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: Mac 20 – 24

Time Market Event Actual Forecast Previous
Monday – 20th March 2023
09:15 CNY PBoC Loan Prime Rate 3.65% 3.65%
22:00 EUR ECB President Lagarde Speaks
Tuesday –21st March 2023
08:30 AUD RBA Meeting Minutes
18:00 EUR German ZEW Economic Sentiment (Mar) 16.4 28.1
20:30 CAD Core CPI (MoM) (Feb) 0.3%
20:30 EUR ECB President Lagarde Speaks
22:00 USD Existing Home Sales 4.17M 4.00M
Wednesday –22nd March 2023
04:30 USD API Weekly Crude Oil Stock 1.155M
15:00 GBP CPI (YoY) (Feb) 9.8% 10.1%
16:45 EUR ECB President Lagarde Speaks
22:30 USD Crude Oil Inventories 0.811M 1.550M
Thursday –23rd March 2023
02:00 USD Fed Interest Rate Decision 5.00% 4.75%
02:30 USD FOMC Press Conference
16:30 CHF SNB Interest Rate Decision (Q1) 1.00% 1.00%
16:30 CHF SNB Monetary Policy Assessment
17:00 CHF SNB Press Conference
18:00 EUR EU Leaders Summit
Tentative GBP BOE Inflation Letter
20:00 GBP BoE Interest Rate Decision (Mar) 4.25% 4.00%
20:00 GBP BoE MPC Meeting Minutes
20:00 USD Building Permits 1.339M
20:30 USD Initial Jobless Claims 199K 192K
22:00 USD New Home Sales (Feb) 648K 670K
Friday –24th March 2023
07:30 JPY National Core CPI (YoY) (Feb) 3.1% 4.2%
15:00 GBP Retail Sales (MoM) (Feb) 0.2% 0.5%
16:30 EUR German Manufacturing PMI (Mar) 47.0 46.3
17:00 EUR         S&P Global Composite PMI (Mar) 52.0 52.0
17:30 GBP Composite PMI 52.7 53.1
17:30 GBP Manufacturing PMI 50.0 49.3
17:30 GBP Services PMI 53.0 53.5
18:00 EUR EU Leaders Summit
20:30 USD Core Durable Goods Orders (MoM) (Feb) 0.2% 0.8%
20:30 CAD Core Retail Sales (MoM) (Jan) 0.6% -0.6%
21:30 USD FOMC Member Bullard Speaks
21:45 USD S&P Global Composite PMI (Mar) 47.5 50.1

 

 

 

 

 

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