20 December 2021 Weekly Analysis
GCMAsia Weekly Report: December 20 – 24
Market Review (Forex): December 13 – 17
US Dollar
The dollar index which traded against a basket of six major currency pairs surged over the backdrop of upbeat economic data as well as hawkish sentiment from Federal Reserve last week. Rate hike expectation and reduction of bond purchasing program would diminish the money circulation in the US market and lower the inflation risk in future, which spurring bullish momentum on the US Dollar. The Dollar Index has ended last week session at the price of 96.55.
On the monetary policy front, the US Dollar received bullish momentum following the Federal Reserve unleashed their hawkish tone toward the economic development in the Unites States. The fresh set of economic projections released on last week had indicated that the Monetary Policy Committee (MPC) expect to raise interest rates by three times in next year, citing that a strong economy growth would be expected to last until mid-2022. In fact, the US Central Bank claimed that they would start to accelerate the process of bond tapering program, suggesting the stimulus will end by March to combat the upcoming inflation. The recent inflation data had indicated the prices rising at a pace not seen since 1982, raising pressure for the Federal Reserve to take further action. Nonetheless, the gains experienced by the US Dollar was limited amid uncertainty of the Covid-19 variant. The rising numbers of the Omicron Covid-19 variant could be prompting the government to re-implement the nationwide lockdown which raising the concerns over the supply and demand mismatches due to labor shortage while increasing the stagflation risk in future.
The overall prospect for the US Dollar as for now remained upbeat amid market participants expected the Fed would likely to implement contraction monetary policy in short-term basis. Nonetheless, it is worth to mention that the ongoing Covid-19 Omicron Variant as well as the vaccine development should not be ignored as unforeseen evolution of these events will affect the global economy as well as the safe-haven US Dollar in some degree.
USD/JPY
The pair of USD/JPY received bearish momentum on last week while ending last Friday session at the price of 113.55. The overall bearish momentum for the pair of USD/JPY last week was mainly due to the appreciation of Japanese Yen. The safe-haven Japanese Yen received significant bullish momentum, which buoyed by the rising fears upon the Covid-19 Omicron variant in the global financial market. Besides, Japanese Yen received further bullish momentum following the Bank of Japan announced plans to scale back its emergency economic support programmed, tapering its bond purchasing program to pre-pandemic levels in response to surging inflation.
EUR/USD
The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.1245. The overall momentum for the Euro remained bearish amid spiking numbers of Covid-19 in European region had prompted the European country to re-enter lockdown, which dialed down the market optimism toward the economic progression in European region. According to CNBC, the Netherlands has become the first EU country to re-enter a strict nationwide Covid-19 restriction in response to the spread of Omicron variant. Bars, restaurants non-essential hops, cinemas and gym were forced to close on Sunday morning and will last until at least 14th January. As for now, investors would continue to scrutinize the latest updates with regards of Covid-19 development in order to gauge the likelihood movement for Euro.
GBP/USD
The pair of GBP/USD slumped last week while closing its market price at 1.3235. Pound Sterling slumped significantly despite the unexpected hawkish decision from the Bank of England last week, as rising numbers of the Omicron variant had dialed down the market optimism toward the economic progression in United Kingdom. Bank of England (BoE) had announced to increase the interest rate by 15 basis point from 0.10% to 0.25%. The action was taken as inflationary pressure extended its appreciation for the past few months, topping 10 years high of 5.1% for the month of November. Higher official interest rates can raise the cost of borrowing for businesses and households, as well as encouraging people to save more, thereby helping to reduce demand and inflation rate. Though, the spiking numbers of the Omicron variant had spurred uncertainty toward the economic prospect for the United Kingdom, leaving the economy at the risk of stagflation.
Market Review (Commodities): December 13 – 17
GOLD
Gold price surged last week with the price of $1802.10 per troy ounce amid spiking numbers of Covid-19 cases around the world had spurred risk-off sentiment in the global financial market, prompting investors to shift their portfolio toward safe-haven asset such as gold. According to CNBC, nations across Europe have been tightening Covid-19 restrictions in order to combat the spread of Omicron variant around the world. The Netherlands became the first European country to announce a full lockdown to fight the variant. The re-implementation of highly stringent lock-down would continue to spur negative prospect for the global economy. Nonetheless, the gains experienced by the safe-haven gold was limited amid hawkish expectation from Federal Reserve. Market participants expected the Federal Reserve would implement contractionary monetary policy in future to combat the high inflation risk, which dragging down the inflation-hedged commodity such as gold.
CrudeOIL
The price of crude oil slumped significantly last week while closing last Friday session with the price of $68.40. The oil market edged lower amid rising numbers of Covid-19 Omicron variant around the world had continue to spur negative prospect for this black-commodity. Nonetheless, the losses experienced by the crude oil commodity was limited over the backdrop of bullish inventory data last week. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories came in at -4.584M, better than the market forecast at -2.082M.
Weekly Outlook: December 20 – 24
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims in order to determine further direction. Besides that, the ongoing situation with coronavirus 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: December 20 – 24
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 20th December 2021 | |||||
| 8:30 | AUD | Mid-Year Economic and Fiscal Outlook | – | – | – |
| 9:30 | CNY | PBoC Loan Prime Rate | – | – | 3.85% |
| Tuesday – 21st December 2021 | |||||
| 8:30 | AUD | RBA Meeting Minutes | – | – | – |
| 17:30 | GBP | Retail Sales (MoM) (Nov) | – | 1.00% | 0.80% |
| 21:30 | CAD | Core Retail Sales (MoM) (Oct) | – | 1.60% | -0.20% |
| Wednesday – 22nd December 2021 | |||||
| 7:50 | JPY | BoJ Monetary Policy Statement | – | – | – |
| 15:00 | GBP | GDP (YoY) (Q3) | – | 6.60% | 6.60% |
| 21:30 | USD | GDP (QoQ) (Q3) | – | 2.10% | 2.10% |
| 23:00 | USD | CB Consumer Confidence (Dec) | – | 110.2 | 109.5 |
| 23:00 | USD | Existing Home Sales (Nov) | – | 6.50M | 6.34M |
| 23:30 | USD | Crude Oil Inventories | – | -2.082M | -4.584M |
| Thursday –23rd December 2021 | |||||
| 21:30 | USD | Core Durable Goods Orders (MoM) (Nov) | – | 0.60% | 0.50% |
| 21:30 | USD | Initial Jobless Claims | – | 205K | 206K |
| 21:30 | CAD | GDP (MoM) (Oct) | – | 0.80% | 0.10% |
| 23:00 | USD | New Home Sales (Nov) | – | 770K | 745K |
| Friday – 24th December 2021 | |||||
| N/A | |||||