23 May 2022 Weekly Analysis
GCMAsia Weekly Report: May 23 – 27
Market Review (Forex): May 16 – 20
US Dollar
The Dollar Index which traded against a basket of six major currencies retreated from its higher-level last week amid the rising concerns upon the stagflation risk in the United States, diminishing the appeal for the US Dollar. Though, investors currently would continue to scrutinize the Federal Reserve’s meeting minutes to receive further trading signal. The Dollar Index has closed its market price at 102.65.
Currently, the economists expected that the US economy could be heading toward recession in the next year amid the mounting worries that the rising borrowing costs for consumers and business as well as the spiking inflation risk could be spurring further pessimism toward the economic progression. Meanwhile, the inflation rate, which remains near 40-year highs has become a main challenge for the economy and global central bank. The Federal Reserve has raised its interest rate by 75 basis point since January 2022, while officials are signaling more aggression upon the rate hike decision to combat the spiking inflation risk. Indeed, the interest-rate-sensitive sectors had been already feeling the brunt of Fed’s promise to keep contractionary monetary policy conditions. According to National Association of Realtors, US Existing Home Sales notched down significantly from the previous reading of 5.75M to 5.61M, lower than the market forecast at 5.65M, indicating that the mortgage demand continues to decline. In addition, the Goldman Sachs revised down its forecast for second-quarter US economic growth, citing the supply chain disruptions following the invasion of Russia to Ukraine as well as the implementation of lockdown policy in China.
Nonetheless, there are still several upbeat economic indicators to consider. The recent economic data had indicated that currently the employment levels and consumer spending in the United States remained resilient. According to CNBC, the consumer expenditures in the United States rose by 2.7% during the last quarter. As conclusion, the overall economic momentum for the United States remains mixed while investors would continue to eye on the monetary policy decision from Fed to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY depreciated last week while closing its market price at 127.40. The overall movement for the pair of USD/JPY remained bearish amid the weakening US Dollar. Besides, the rising concerns upon the global recession as well as stagflation risk had also stoked a shift in sentiment toward the safe-haven asset such as Japanese Yen, spurring further bearish momentum on the pair of USD/JPY.
EUR/USD
The pair of EUR/USD surged last week while closing its market price at 1.0570. The Euro rebounded significantly following the European Central Bank policymaker Francois Villeroy de Galhau claimed that the weakness of Euro in currency markets could be threaten the European Central Bank’s efforts to combat its inflation risk. Market participants speculated that the continuing depreciation for Euro would likely to trigger the manipulation of Euro market from ECB while spurring higher possibility for the rate hike decision in future to attract foreign investment into the Euro market. Besides, he also reiterated that the ECB governing council meeting could be expected in June while further discussion with regards of the tightening monetary policy would be discussed. Indeed, the money market pricing suggests that investors are currently speculating that the ECB would likely to announce for at least 25-basis point rate hike during the ECB’s July meeting.
GBP/USD
The pair of GBP/USD appreciated last week while ending last week’s session at the price of 1.2500. The Pound Sterling surged over the backdrop of the string of upbeat economic data from UK region last week. According to Office for National Statistics, UK Claimant Count Change came in at 56.9K, better than the market forecast at -42.5K. Meanwhile, the UK Average Index + Bonus and UK retail sales for last month came in at 7.0% and 1.4%, which both fared better than market expectation at 5.4% and -0.2% respectively. As both data exceed the market expectation, which could be spurring further speculation on rate hike decision from BoE in future.
Market Review (Commodities): May 16 – 20
GOLD
Gold price surged last week while closing its market price at $1854.30 per troy ounces. The gold price received significant bullish momentum last week amid the concerns upon the stagflation risk as well as the global recession continue to diminish the risk appetite in the global financial market, which prompting investors to shift their portfolio from the riskier equity market into the safe-haven gold. Though, investors would continue to focus on the latest monetary policy decision from Fed to gauge the likelihood movement for the gold.
CrudeOIL
Crude oil price was edged higher while ending last week’s session at the price of $110.80 per barrel. Crude oil price was traded higher following the Chinese authorities started to ease the lockdown restriction. According to CNBC, more Shanghai residents were allowed to go out for shop for groceries in nearly two months. Besides, Shanghai had recorded no new infections outside quarantined areas for fifth day in row. Economist expected that the economic activity in China would start to recover with business able to operate with workers living on site while authorities allow more to resume normal operations from the beginning of June. Though, as for now investors would eye on the implementation of sanction from EU to Russia to receive further trading signal for oil market.
Weekly Outlook: May 23 – 27
For the week ahead, investors would continue to focus on crucial economic data such as the US GDP 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: May 23 – 27
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 23rd May 2022 | |||||
| 16:00 | EUR | German Ifo Business Climate Index (May) | – | 91.4 | 91.8 |
| Tuesday – 24th May 2022 | |||||
| 00:15 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 15:30 | EUR | German Manufacturing PMI (May) | – | 54.0 | 54.6 |
| 16:30 | GBP | Composite PMI | – | – | 58.2 |
| 16:30 | GBP | Manufacturing PMI | – | – | 55.8 |
| 16:30 | GBP | Services PMI | – | – | 58.9 |
| 22:00 | USD | New Home Sales (Apr) | – | 750K | 763K |
| Wednesday – 25th May 2022 | |||||
| 00:20 | USD | Fed Chair Powell Speaks | – | – | – |
| 02:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 10:00 | NZD | RBNZ Interest Rate Decision | – | 2.00% | 1.50% |
| 11:00 | NZD | RBNZ Press Conference | – | – | – |
| 14:00 | EUR | German GDP (QoQ) (Q1) | – | 0.2% | 0.2% |
| 16:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 20:30 | USD | Core Durable Goods Orders (MoM) (Apr) | – | 0.6% | 1.2% |
| 22:30 | USD | Crude Oil Inventories | -3.394M | 1.383M | 8.487M |
| Thursday – 26th May 2022 | |||||
| 02:00 | USD | FOMC Meeting Minutes | – | – | – |
| 20:30 | USD | GDP (QoQ) (Q1) | – | -1.4% | -1.4% |
| 20:30 | USD | Initial Jobless Claims | – | 213K | 218K |
| 20:30 | CAD | Core Retail Sales (MoM) (Mar) | – | 2.0% | 2.1% |
| 22:00 | USD | Pending Home Sales (MoM) (Apr) | – | -1.9% | -1.2% |
| Friday – 27th May 2022 | |||||
| 09:30 | AUD | Retail Sales (MoM) (Apr) | – | 1.0% | 1.6% |
| 20:30 | USD | Core PCE Price Index (MoM) (Apr) | – | 0.3% | 0.3% |
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