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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