21st March 2022 Weekly Analysis
GCMAsia Weekly Report: March 21 – 25
Market Review (Forex): March 14 – 18
US Dollar
The Dollar Index which traded against a basket of six major currencies received significant bullish momentum last week over the backdrop of hawkish sentiment from Federal Reserve as well as upbeat economic data from US region. Besides, rising tensions between Russian-Ukraine had also stoked a shift in sentiment toward safe-haven asset, spurring further bullish momentum on the safe-haven Dollar. The Dollar index has ended last week session at the price of 98.21.
Last week, the US Dollar surged following US Federal Reserve unleashed their monetary policy plan without delivering a tougher surprise. According to Reuters, the Federal Reserve on Wednesday had increased their interest rates for the first time since 2018 and laid out an aggressive plan to reduce the bond buying program. The Fed raised interest rates by the expected quarter of a percentage point into 0.5% and forecast the policy rate would reach a range of 1.75% to 2% by the end of this year and 2.8% next year in order to combat the high inflation rate. According to Reuters, two of the Federal Reserve policymakers claimed that the central bank needs to take more aggressive steps to stabilize the high inflation that hit at 40-year highs. St. Louis Fed president James Bullard claimed that he is in favor of a half-point increase interest during the next monetary policy. meeting, while reiterating that Fed’s overnight lending rate should be increasing to more than 3% this year. Indeed, most of the policymakers had expressed their support for more aggressive action, with seven projecting rates to rise above 2% in year of 2022. On the economic data front, Department of Labor reported that the US Initial Jobless Claims came in at 214K, better than the market forecast at 220k. Meanwhile, according to Census Bureau, US Building Permits came in at 1.859M, which also fared better-than-market expectation at 1.850M. As both crucial economic data fared upbeat reading, which dialed up the market optimism toward the economic progression in the United States.
On the Russian-Ukraine tensions, according to Azjazeera, despite the earlier positive development upon the talks between Russia and Ukraine, the conflict between both parties persisted. Last week, Ukrainian officials said a Russian attack killed 21 people in the town of Merefa outside the city of Kharviv in the east of the country. Besides, Ukraine also accused Russian forces of bombing a theatre sheltering civilians in the besieged southern city of Mariupol. US Secretary of State Antony Blinken said on Thursday that Russia may prepare a chemical attack to escalate the war, noting that United States accurately predicted the invasion weeks before it started. Rising tensions between Russia-Ukraine had spurred further risk-off sentiment in the global financial market, which prompting investors to shift their portfolio toward safe-haven Dollar.
As for now, investors would remain their focus toward the latest development with regards of the relationship between Russia-Ukraine as well as further monetary policy decision from Fed to receive further trading signal.
USD/JPY
The pair of USD/JPY received bullish on last week amid appreciation of US Dollar while ending last Friday session at the price of 119.20. The Japanese Yen received bearish momentum over the backdrop of dovish tone from Bank of Japan last week. According to Reuters, the Bank of Japan maintained its massive stimulus plan on Friday and warned of heightening risks to a fragile economic recovery from the Ukraine crisis. As widely expected, the BoJ maintained its interest rate at -0.1%. The BOJ’s dovish tone is contrast with US Fed and Bank of England, which prompting investors to shift their portfolio from Japan region to US and UK.
EUR/USD
The pair of EUR/USD surged throughout the week while ending last week session at the price of 1.0912. The overall trend for Euro remained bullish last week over the backdrop of upbeat inflation data, which increasing the odds for European Central Bank to implement contractionary monetary policy to combat high inflation risk. According to Eurostat, Eurozone Consumer Price Index (CPI) YoY notched up from the previous reading of 5.8% to 5.9% on year in February, exceeding the market forecast. The acceleration in the Eurozone’s annual inflation rate had adds further evidence to a build-up in price pressures globally that is lasting longer than initially expected. High inflation risk would likely to prompt the European Central Bank to implement contractionary monetary policy as well as increase their interest rate, which diminishing the money circulation in the Europe market while spurring bullish momentum on Euro
GBP/USD
The pair of GBP/USD appreciated last week while closing its market price at 1.3035. The Pound Sterling received bullish momentum last week following Bank of England unleashed their hawkish tone toward the economic progression. Last week, the Bank of England had increased their interest rates for the third consecutive meeting while reiterating that the Russia-Ukraine conflict is expected to keep inflation higher in long-term basis. The Monetary Policy Committee voted 8-1 in favor of a further 0.25% hike to its main Bank rate, taking it to 0.75%. The MPC also claimed that further modest tightening in monetary policy may be appropriate in the coming months.
Market Review (Commodities): March 14 – 18
GOLD
Gold price slumped significantly last week with the price of $1925.70 per troy ounce amid rate hike policy from the Federal Reserve and Bank of England last week continue to drag down the appeal for the safe-haven gold. Contractionary monetary policy would likely to reduce the money circulation in the global financial market, which stabilizing the high inflation rate in future while dragging down the appeal for inflation-hedging commodity such as gold. As of writing, investors would continue to remain their focus toward the inflation data as well as the Russia-Ukraine development to gauge the likelihood movement for the safe-haven gold.
CrudeOIL
The price of crude oil surged last week while closing last Friday session with the price of $106.25 per barrel. The crude oil price received bullish momentum significantly over the backdrop of resurgence tensions between Russia-Ukraine. Besides, the oil market extends its gains following the IEA forecast report was released. The International Energy Agency claimed that this week the oil market was still set for a 700,000-bpd deficit in the second quarter following the implementation of sanction from Western countries on Russia. Nonetheless, the gains experienced by the crude oil was limited by the bearish inventory data. According to Energy Information Administration (EIA), US Crude Oil Inventories notched up significantly from the previous reading of -1.863M to 4.345M, missing the market forecast at -1.375M.
Weekly Outlook: March 21 – 25
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims and Fed monetary policy decision 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: March 21 – 25
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 21st March 2022 | |||||
| 9:15 | CNY | PBoC Loan Prime Rate | – | – | 3.70% |
| 15:30 | EUR | ECB President Lagarde Speaks | – | – | – |
| 22:00 | USD | Fed Chair Powell Speaks | – | – | – |
| Tuesday – 22nd March 2022 | |||||
| 19:00 | BRL | BCB Copom Meeting Minutes | – | – | – |
| 21:15 | EUR | ECB President Lagarde Speaks | – | – | – |
| Wednesday – 23rd March 2022 | |||||
| 15:00 | GBP | CPI (YoY) (Feb) | – | 5.90% | 5.50% |
| 20:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 20:00 | USD | Fed Chair Powell Speaks | – | – | – |
| 20:30 | GBP | Annual Budget Release | – | – | – |
| 22:00 | USD | New Home Sales (Feb) | – | 813K | 801K |
| 22:30 | USD | Crude Oil Inventories | – | – | 4.345M |
| Thursday – 24th March 2022 | |||||
| 16:30 | CHF | SNB Interest Rate Decision (Q1) | – | -0.75% | -0.75% |
| 16:30 | CHF | SNB Monetary Policy Assessment | – | – | – |
| 16:30 | EUR | German Manufacturing PMI (Mar) | – | 56 | 58.4 |
| 17:30 | GBP | Composite PMI | – | 58.7 | 59.9 |
| 17:30 | GBP | Manufacturing PMI | – | 57 | 58 |
| 17:30 | GBP | Services PMI | – | 58 | 60.5 |
| 17:30 | CHF | SNB Press Conference | – | – | – |
| 18:00 | EUR | EU Leaders Summit | – | – | – |
| 20:30 | USD | Core Durable Goods Orders (MoM) (Feb) | – | 0.60% | 0.70% |
| 20:30 | USD | Initial Jobless Claims | – | 211K | 214K |
| Friday – 25th March 2022 | |||||
| 15:00 | GBP | Retail Sales (MoM) (Feb) | – | 0.80% | 1.90% |
| 17:00 | EUR | German Ifo Business Climate Index (Mar) | – | 94 | 98.9 |
| 18:00 | EUR | EU Leaders Summit | – | – | – |
| 22:00 | USD | Pending Home Sales (MoM) (Feb) | – | 1.50% | -5.70% |