20 June 2022 Weekly Analysis
GCMAsia Weekly Report: June 20 – 24
Market Review (Forex): June 14 – 18
US Dollar
The Dollar Index which traded against a basket of six major currencies received significant bullish momentum last week following the Federal Reserve announced the most aggressive rate hike in nearly 30 years, spurring significant bullish momentum on the US Dollar. Though, the gains experienced by the US Dollar was still limited by the downbeat economic data. The Dollar Index has closed its market price at 104.65
On the monetary policy front, the Federal Reserve increased their benchmark borrowing rate by 0.75% on last week to combat the spiking number of the inflation rate. According to the latest monetary policy, the Federal Open Market Committee reaffirmed that it remains “strongly committed to stabilize the inflation rate to its 2% objective”, while reiterating that they would continue to raise the key rate until they achieve their inflation target. Currently the central bank set the overnight borrowing rate to a range of 1.5%-1.75%. Though, the Federal Reserve also warned that the economic projections forecasted an expected rise in unemployment rate in the years ahead amid the rising stagflation risk as well as the aggressive contractionary monetary policy would likely to jeopardize US economy.
Despite that, the gains experienced by the US Dollar was limited by the bearish economic data. According to Census Bureau, US Building Permits notched down significantly from the previous reading of 1.8223M to 1.695M, missing the market forecast at 1.785M. Besides, the US Philadelphia Fed Manufacturing Index and US Initial Jobless Claims came in at -3.3 and 229K, which fared worse-than-expectation at 5.5 and 215K respectively. As most of the crucial economic data indicated worse reading, which dialing down the market optimism toward the economic progression in United States. Nonetheless, investors would continue to scrutinize the latest updates with regards of the crucial economic data as well as the latest monetary policy decision from Fed to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY surged last week while closing its market price at 134.96. The Japanese Yen has fallen significantly following the Bank of Japan maintained its ultra-low interest rate monetary policy while reiterating that they will continue its bond-buying program to stabilize the government yield. The easing monetary policy from Bank of Japan, in contrast with other central bank central banks such as US, UK and Switzerland which are flagging aggressive rate hike to curb inflation risk. Despite that, the central bank chief Haruhiko Kuroda warned that the significant depreciation of Japanese Yen would likely to escalate further tensions for economic growth, vowing that they would “respond appropriately” by manipulating the Japanese Yen if needed.
EUR/USD
The pair of EUR/USD surged last week while closing its market price at 1.0500. The Euro received bullish momentum last week following the European Central Bank confirmed their plans to increase interest rate by 25 basis point in July, its first-rate hike in 11 years to combat the inflation rate. Besides, they also reiterated that a bigger rate hike could follow in September if necessary. The hawkish tone which unleashed by the European Central Bank had pushed up borrowing costs sharply in countries in southern Europe, prompting the central banks to calm fears of debt crisis by promising their “flexibility” in managing its huge balance sheet and accelerating work on new ways to diminish stress on heavily indebted countries such as Italy and Greece. Though, currently the economic prospect in European region remained vague as the European central bank had yet to release further details of their monetary policy. Hence, investors would continue to eye on the latest monetary plan from ECB to receive further trading signal.
GBP/USD
The pair of GBP/USD appreciated last week while ending last week session at the price of 1.2225. The Pound Sterling surged last week following the Bank of England increased their interest rate by 25 basis point last week, the fifth consecutive rate hike in order to steam the pace of spiking inflation rate. Currently, the inflation rate is currently at a 40-year high of 9%, while the Bank of England warned that it could surpass by 11% in the year of 2022. Nonetheless, the gains experienced by the Pound Sterling was limited following the Bank of England unleashed their concerns upon the economic momentum in the United Kingdom. The Monetary Policy Committee (MPC) warned that they expect the economy to be weaker immediately, with a fall in the economy this quarter while stagflation risk would continue to linger in the UK financial market.
Market Review (Commodities): June 14 – 18
GOLD
Gold price depreciated last week while closing its market price at $1839.47 per troy ounces. Gold price received bearish momentum last week following the strengthening US Dollar. The rate hike decision from Federal Reserve would likely to diminish US Dollar circulation in the market, dialed up the market optimism toward US Dollar. Nonetheless, the losses experienced by the gold market was limited by the fears upon the recession. Recently, bearish economic data as well as the rising stagflation risk had spurred risk-off sentiment in the global financial market, which leading to significant drop in US equity market while increasing the appeal for the safe-haven gold.
CrudeOIL
Crude oil price eased while ending last week session at the price of $111.40 per barrel. Crude oil price received bearish momentum amid growing fears upon the recession in the United States while aggressive rate hike from the global central bank to curb inflation had also spurred negative prospect toward the economic momentum in the global financial market. Besides that, the oil price extends its losses amid bearish inventory data. According to Energy Information Administration (EIA), the US Crude Oil Inventories came in at 1.956M, higher than the market forecast at -1.314M.
Weekly Outlook: June 20 – 24
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims 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: June 20 – 24
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 20th June 2022 | |||||
| 09:15 | CNY | PBoC Loan Prime Rate | – | – | 3.70% |
| 21:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| Tuesday – 21th June 2022 | |||||
| 09:30 | AUD | RBA Meeting Minutes | – | – | – |
| 20:30 | CAD | Core Retail Sales (MoM) (Apr) | – | 0.6% | 2.4% |
| 22:00 | USD | Existing Home Sales (May) | – | 5.39M | 5.61M |
| Wednesday – 22th June 2022 | |||||
| 14:00 | GBP | CPI (YoY) (May) | – | 9.1% | 9.0% |
| 20:30 | CAD | Core CPI (MoM) (May) | – | 0.4% | 0.7% |
| 21:30 | USD | Fed Chair Powell Testifies | – | – | – |
| Thursday – 23th June 2022 | |||||
| 04:30 | USD | API Weekly Crude Oil Stock | – | – | 0.736M |
| 15:30 | EUR | German Manufacturing PMI (Jun) | – | 54.0 | 54.8 |
| 16:30 | GBP | Composite PMI (Jun) | – | 51.8 | 51.8 |
| 16:30 | GBP | Manufacturing PMI (Jun) | – | 54.6 | 54.6 |
| 16:30 | GBP | Services PMI (Jun) | – | 51.8 | 51.8 |
| 18:00 | EUR | EU Leaders Summit | – | – | – |
| 20:30 | USD | Initial Jobless Claims | – | 225K | 229K |
| 22:00 | USD | Fed Chair Powell Testifies | – | – | – |
| 23:00 | USD | Crude Oil Inventories | – | – | 1.956M |
| Friday – 24th June 2022 | |||||
| 14:00 | GBP | Retail Sales (MoM) (May) | – | -0.9% | 1.4% |
| 16:00 | EUR | German Ifo Business Climate Index (Jun) | – | 92.9 | 93.0 |
| 18:00 | EUR | EU Leaders Summit | – | – | – |
| 22:00 | USD | New Home Sales (May) | – | 585K | 591K |