21 June 2021 Weekly Analysis
GCMAsia Weekly Report: June 21 – 25
Market Review (Forex): June 14 – 18
US Dollar
The dollar index which traded against a basket of six major currency pairs surged following the Federal Reserve unleashed their hawkish tone toward the economic outlook. The 10-year Treasury yield surged significantly amid the Monetary Policy Committee (MPC) signaled two quarter-point rate hikes by the end of 2023, which dialed up the market optimism toward the appeal of US Dollar. The Dollar Index was closing its price on last Friday Session at the price of 92.20.
According to the Federal Reserve’s monetary report, the committee forecasted that the U.S. economic outlook for inflation would continue to increase this year, while the overall economic growth would be expected to reach 7%. Besides, the Federal Reserve also made technical adjustments aimed at keeping its key overnight benchmark interest rate from falling too low. The Fed raised the reverse repo rates during the U.S. central bank at the end of a two-year policy meeting. Indeed, Monetary Policy Committee (MPC) anticipated that the rate hike is possible in the year 2022 if US economy recovers substantially and achieve their earlier target at 2% inflation rate. Such hawkish tone had signaled that the Federal Reserve might start to discuss the possibility of tapering their monthly bond purchasing program and laying the way for a higher interest rate in future.
Nonetheless, the gains experienced by the US Dollar was limited over the backdrop of bearish economic data. According to the latest statistics, U.S. Retail Sales and U.S. Philadelphia Fed Manufacturing Index came in at -1.3% and 30.7, which both fared worse-than-expectation at -0.8% and 31.5 respectively. Besides, US Initial Jobless Claims notched up significantly from the previous reading of 375K to 412K, which also worse than the market forecast at 359K. As for now, investors would continue to scrutinize the updates with regards of future economic data as well as Fed’s monetary policy to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY received bullish momentum on last week while ending last Friday session at the price of 110.20. The overall bullish momentum for the pair was mainly due to the appreciation of the US Dollar. Besides, Japanese Yen extend its losses following the Japan’s central bank decided to maintain its ultra-easing monetary policy in order to mitigate the downside effects of the Covid-19 pandemic. The central bank would continue to set short-term interest rates at -0.1% while maintaining 10-year Japanese government bonds at around zero percent.
EUR/USD
The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.1860. The overall bearish momentum for the pair of EUR/USD was mainly due to the appreciation of US Dollar. In fact, the Euro extend its losses over the backdrop of dovish statement from the European Central Bank. According to CNBC, the European Central Bank chose not to signal when it might start reducing its pandemic-era stimulus program and expects the Euro zone inflation rate to remain below its target in the foreseeable future. Besides, the central bank also decided to keep its 1.85 trillion-euro aggressive bonds buying program until March 2022 and also maintain its ultra-low interest rates. Nonetheless, investors would remain their focus on future inflation data and central bank’s policy to receive further trading signal.
GBP/USD
The pair of GBP/USD was slumped on last week while closing its market price at 1.3810. Pound Sterling dipped significantly last week following the UK Prime Minister Boris Johnson extend its current lockdown rule in England due to concerns over the Covid-19 variant. According to CNBC, the Public Health England indicate that more than 42,000 cases related to delta variant of Covid-19 have now been confirmed across the region, an increase of 240% from last week. Besides, UK Prime Minister Boris Johnson announced a delay of four weeks to the next phase of England’s lockdown reopening. On the economic data front, Pound Sterling extend its losses over the backdrop of bearish economic data from UK region. According to Office for National Statistics, U.K. Retail Sales declined significantly from the previous reading of 9.2% to -1.4%, missing the market forecast at 1.6%, which dialed down the market optimism toward the economic progression in UK region.
Market Review (Commodities): June 14 – 18
GOLD
Gold price slumped throughout last week with the price of $1766.15 per troy ounce. The gold price dropped sharply following the Federal Reserve signaled it may increase interest rate sooner than expected. Higher interest rates in the U.S. make investing in Americans bonds more attractive to foreigners, which prompting the Treasury yields rallied significantly while diminishing the appeal of the safe-haven gold. As for now, investors would be suggested to maintain their focus on future inflation data as well as future monetary policy in order to gauge the likelihood movement for the safe-haven gold
CrudeOIL
The price of crude oil extends its gains last week while closing last Friday session with the price of $71.50 per barrel amid the market participants speculated that the positive development of Covid-19 vaccination program would enhance the prospect of economic as well as the crude oil demand in future. On the other hand, The oil price surged following OPEC sources claimed that the producer group expected to limit U.S. oil output growth this year despite rising prices, according to Reuters. On the data front, the Energy Information Administration (EIA) reported that the U.S Crude Oil inventories came in at -7.355M, better than the market forecast at -5.241M.
Weekly Outlook: June 21 – 25
For the week ahead, investors would continue to focus on crucial economic data such as US GDP 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: June 21 – 25
| Time | Market | Event | Actual | Forecast | Previous |
| Moday – 21st June 2021 | |||||
| 22.15 | EUR | ECB President Lagarde Speaks | – | – | – |
| Tuesday – 22nd June 2021 | |||||
| 22:00 | USD | Existing Home Sales (May) | – | 5.72M | 5.85M |
| Wednesday – 23rd June 2021 | |||||
| 02:00 | USD | Fed Chair Powell Testifies | – | 63.4 | 64.4 |
| 15:30 | EUR | German Manufacturing PMI (Jun) | – | – | 62.9 |
| 16:30 | GBP | Manufacturing PMI | – | – | 62.9 |
| 16:30 | GBP | Services PMI | – | -5.00% | 4.30% |
| 20:30 | CAD | Core Retail Sales (MoM) (Apr) | – | 875K | 863K |
| 22:00 | USD | New Home Sales (May) | – | -3.290M | -7.355M |
| Thursday – 24th June 2021 | |||||
| 16:00 | EUR | German Ifo Business Climate Index (Jun) | – | 100.1 | 99.2 |
| 19:00 | GBP | BoE Interest Rate Decision (Jun) | – | 0.10% | 0.10% |
| 19:00 | GBP | BoE MPC Meeting Minutes | – | ||
| 20:30 | USD | Core Durable Goods Orders (MoM) (May) | – | 0.70% | 1.00% |
| 20:30 | USD | GDP (QoQ) (Q1) | – | 6.40% | 6.40% |
| 20:30 | USD | Initial Jobless Claims | – | 380K | 412K |
| Friday – 25th June 2021 | |||||
| N/A | |||||