22 February 2021 Weekly Analysis
GCMAsia Weekly Report: February 22 – 26
Market Review (Forex): February 15 – 19
US Dollar
The dollar index which traded against a basket of six major currency pairs was able to record strong gains at the earlier half of the week, but later reversed back most its gains at the end of the week before ending the session at the price of 90.29. The economic data provide a mixed reading in overall, however, latest meeting minutes from Fed reduce the appeal for the greenback.
On data front, the stats were mostly positive on the first half of the week. Core retail sales jumped by 5.9% in January against market forecast of 1.0%. Retail sales also impressed with the reading of 5.3%, higher than market expectation of 1.1%. On top of that, PPI came in at 1.3%, better than market expectation of 0.4%. However, disappointing jobs data on the second half of the week dealt a blow to the market as a reminder of ongoing impact of the pandemic towards U.S labor market. U.S Department of Labor reported that a total of 861,000 claims were filed during the previous week which is higher compared with market expectation of 765,000 claims and the 848,000 claims filed during the previous week.
On the other hand, the Fed also release the minutes from its January policy meeting last week. The Federal Reserve had already warned that the labor market would require more time to recover. In order to help on its recovery, the central bank has assured that the ultra-accommodative monetary policy would remain for a longer period. While the central bank is positive on U.S growth prospect, Fed is unmoved from talks of higher inflation and is unlikely to increase rates or taper its bond buying program. Following the circumstances, market confidence towards the greenback remain weak, thus causing investors to sell-off.
As the dollar will likely to remain under pressure for the time being, market will now be looking for clues from further economic data. Besides that, investors will also focus on COVID-19 situation and vaccine. Reports of new strain of virus could also weigh on near term economy and market sentiment.
USD/JPY
The pair of USD/JPY have rose during the first half of the week before gave up most of its gains at the end of week while closing the market with the price of 104.40. On data front, Japan’s GDP grow 3%, higher than market expectation of 2.3%. Japan National CPI also improved to -0.6% compared to previous reading of -0.12. At the same time, broad U.S dollar weakness also help added further value for the Japanese Yen which cause the pair to fell.
EUR/USD
Pair of EUR/USD remains weak in overall but recover some its loss before ending last week market at the price of 1.2116. From data perspective, Eurozone GDP came in higher at -0.6% against -0.7% forecast while German ZEW Economic Sentiment also rose to 71.2 against 59.6 expectation. German Manufacturing PMI also improved to 60.6 against market forecast of 56.5. While most of the stats were skewed to the positive, vaccine woes and extend lockdown measures in the EU continue to weigh heavily on the pair. On monetary policy last week, the ECB meeting minutes had a cautiously optimistic tone, but still aware of EUR strength and its downside risk.
GBP/USD
The pair of GBP/USD have soared throughout last week while ending the market with strong gains at the price of 1.4002. Following various upbeat factors such as strong vaccine program and declining coronavirus cases, the pair experience a surge in demand. On data front, UK CPI came in at -0.2%, higher than market forecast of -0.4%. While retail sales recorded a lower than expected reading of -8.2% against -2.5% forecast, the data did not deter investors from buying the currency due to strong fundamentals.
Market Review (Commodities): February 15 – 19
GOLD
Gold price have experienced a tremendous sell-off throughout last week and ending the market with a loss at the price of $1783.89 a troy ounce. Risk appetite continues to grow steadily across developed financial markets as outlook remains optimistic for economic recovery in the US and around the world due to prospect of US fiscal stimulus and ongoing fight to contain the COVID-19 pandemic. Therefore, the demand for safe-haven markets such as gold have fell.
CrudeOIL
The price of crude oil was supported on the earlier half of last week, but fell at the end of the wild week while ending the market at the price of 59.02. While Texas continue to struggling with the extreme weather, reports of power restoration and producers ready to restart output production weigh on the black commodity and market starting to take profit.
On the earlier half of last week, crude oil market was supported by massive production shut down in Texas due to loss of power and frozen equipment’s that disrupt oil production. On data front, API reported a decrease of 5.800m barrels in inventories while EIA also reported a decline of 7.258M barrels. Both readings were better than market expectation of a reduction about 2.175M barrels and 2.429M barrels respectively. However, the momentum was completely reversed during the end of the week as power was mostly restored in Friday across Texas, which accounts for more than 40 percent of all U.S. crude oil production. On the other hand, reports of U.S remove sanction to export crude oil from Iran also weigh on the commodity. According to Reuters, an anonymous US official mentioned the American readiness to meet Iran. However, the preconditions include Tehran’s return to the 2015 Nuclear Deal and Europe’s hosting of the talks.
Despite with the retreat, the commodity remains strong on the back of long-term economic recovery from COVID-19 and progress of vaccination around the world while market awaits for more catalyst to determine further direction for the commodity.
Weekly Outlook: February 22 – 26
For the week ahead, investors would continue to focus on the developments on U.S stimulus, coronavirus situation as well as economic data such GDP and Core Durable Goods Orders to determine further direction.
As for oil traders, they will be also 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: February 22 – 26
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 22 February 2021 | |||||
| 17:00 | EUR | German Ifo Business Climate Index (Feb) | – | 90.5 | 90.1 |
| Tuesday – 23 February 2021 | |||||
| 15:00 | GBP | Average Earnings Index +Bonus (Dec) | – | 4.2% | 3.6% |
| 15:00 | GBP | Claimant Count Change (Jan) | – | 35.0K | 7.0K |
| 18:00 | EUR | CPI (YoY) (Jan) | – | 0.9% | 0.9% |
| 23:00 | USD | CB Consumer Confidence (Feb) | – | 90.0 | 89.3 |
| 23:00 | USD | Fed Chair Powell Testifies | – | – | – |
| Wednesday – 23 February 2021 | |||||
| 09:00 | NZD | RBNZ Interest Rate Decision | – | 0.25% | 0.25% |
| 09:00 | NZD | RBNZ Rate Statement | – | – | – |
| 10:00 | NZD | RBNZ Press Conference | – | – | – |
| 15:00 | EUR | German GDP (QoQ) (Q4) | – | 0.1% | 0.1% |
| 23:00 | USD | New Home Sales (Jan) | – | 855K | 842K |
| 23:30 | USD | Crude Oil Inventoreis | – | -2.429M | -7.258M |
| Thursday – 24 February 2021 | |||||
| 21:30 | USD | Core Durable Goods Orders (MoM) (Jan) | – | 0.7% | 1.1% |
| 21:30 | USD | GDP (QoQ) (Q4) | – | 4.1% | 4.0% |
| 21:30 | USD | Initial Jobless Claims | – | 843K | 861K |
| 23:00 | USD | Pending Home Sales (MoM) (Jan) | – | -0.1% | -0.3% |
| Friday – 25 February 2021 | |||||
| 03:00 | USD | US Federal Budget | – | – | – |