24 July 2023 Weekly Analysis
GCMAsia Weekly Report: July 24 – 29
Market Review (Forex): July 17 – 21
US Dollar
The U.S. dollar index against a basket of six major currencies rebound after hitting its 15-month lower points while closing at the price of 100.75.
Last week, investors turned their attention to the other currencies pairs’ crucial economic data since the FOMC blackout period started a week before the Saturday preceding a Federal Open Market Committee (FOMC) meeting. On Tuesday, the greenback experienced a selloff by the global investor as retail sales revealed lower than expected but rebounded after the Canada CPI release. Retail sales in June were recorded at 0.2% lower than the previous reading and forecast at 0.5%. It is reflecting that retail sales in the US were experiencing a slowing down after the Fed continues its tightening moves. Although the retail sales sectors are slowing down, it did not change the Fed on its monetary policy moves. However, Canada’s consumer price index showed a colling in price pressure as the figure down to 3.2% from 3.7%. lower than economists anticipated by 3.5%, the Canadian dollar slipped, and the dollar strengthened.
The dollar index extended its gains on Thursday after the initial jobless claim suggesting that the labor market remains resilient. As the reading was recorded at 228K versus the previous week’s reading of 242K. The data provided more room for the Fed to tighten policy further, as a tightening labor market could lead to more robust spending and high inflation.
USD/JPY
The pair of USD/JPY extended its gains last week while closing its market price at 141.82 after the Japanese Yen slumped as the Bank of Japan high likely to maintain its current interest rate. Prior to that, Japan’s annual exporters grew less than expected in June by recoding 1.5%, while the economist’s expected growth of 2.2%. Slowing down in Japan export highlighting weak China and Water demand. It could be a factor that increase the pressure on the Bank of Japan (BoJ) if it revised its ultra-loosen policy. Following that, Reuters reported on Friday that the BoJ policy makes want to ensure wages and inflation keep rising before any changes to the policy, five sources said. Meanwhile, Japan announced its Jun National Core Consumer Price Index (CPI). The CPI in June grew to 3.3% from 3.2% in May, in line with market expectations, Statistics Bureau of Japan data showed.
EUR/USD
The pair of EUR/USD extended its losses last week while closing its market price at 1.1124. The euro slipped as price pressure showed some sign of easing after the CPI slipped when compared to the previous month. The CPI in June was in line with market expectations, it reduced to 5.5% from the previous 6.1%, However, the core CPI rose to 5.5% from 5.4%, upbeat the economist’s estimation. Investors are priced at around a 95% chance of a 25-basic pint ECB hike next week, and a 70% chance of a further rate hike in September. Eurozone data have been underwhelming in recent months, as Germany’s economy shrink more than expected this year. Further tightening implemented by the Eurozone Central Bank (ECB) will darken the Europe economic outlook.
GBP/USD
The pair of GBP/USD extended it’s losses last week while closing its market price at 1.2852. The Pound Sterling edged lower against the dollar after the UK inflation cooled down in June. Economists had forecast the reading down to 8.2% in June from 8.7% in May, while the actual reading marked at 7.9% slipped more than expected. Since the Bank of England’s (BoE) continued rising interest rates, the effect of further tightening started to filter into the UK economy. It is worth noting that the current inflation is still well above the central bank’s 2% target, and the highest among advanced economies. McKinsey economist comments that with continued higher prices, higher interest rates, and below the inflation wage growth, some of the UK citizens had to dip into savings to cover their expenses, and 21% used their credit cards more often.
Market Review (Commodities): July 17 – 21
GOLD
The gold price slumped while closing its market price at 1961.71. As global inflation started cooling down, currency pairs such as CAD, and GBP slipped and the dollar index strengthened, and gold prices traded lower. The initial jobless claim released last Thursday was reduced to 228k lower than expectations of 242k polled by economists. The lower-than-expected reading suggests the Fed has more room to hike the rate as the labour market remains in resilient conditions. Moreover, the gold price continues to trade down after BoJ is leaning toward to maintain its yield curve control and current monetary policy to -0.10%. Therefore, the Japanese Yen slipped and the dollar index extended its gains, the gold price slumped as the dollar strengthened.
CrudeOIL
The crude oil price traded higher while closing its market price at 76.77. Last week, the crude oil prices soared on Monday to 75.90 and quickly slipped from the higher places. News reported that Saudi Arabia extended its oil production cuts until the end of 2024, and the oil price soared. However, the information was confirmed to be false and the oil price traded under pressure. The crude extended its gains on Thursday after Reuters claimed that China continues to import crude from Russia and the amount of import reached a new high record. Crude imports in June totalled 52.06 million tons, soaring 45.3% year over year. That reflects strong demand for crude in China, boosting crude prices. Moreover, geopolitical tension between Russia and Ukraine continues to lead the black commodities to a higher place. Black Sea grain deal expires after Russia quits and warned it could not guarantee the safety of ships in moves to United Nations.
Weekly Outlook: July 24- 28
During this week, investors will pay attention to key financial events and data such as the Fed interest rate decision, the European Central Bank interest rate decision and the Bank of Japan interest rate decision to judge the trend and direction of the currencies of various countries.
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: July 24 – 28
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 24 July 2023 | |||||
| 15:30 | EUR | HCOB Germany Manufacturing PMI (Jul) | – | 40.3 | 40.6 |
| 16:30 | GBP | S&P Global/CIPS UK Manufacturing PMI | – | 45.9 | 46.5 |
| 21:45 | USD | S&P Global US Services PMI (Jul) | – | 54.0 | 54.4 |
| Tuesday – 25 July 2023 | |||||
| 22:00 | USD | CB Consumer Confidence (Jul) | – | 113.0 | 109.7 |
| Wednesday – 26 July 2023 | |||||
| 04:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | -0.797M |
| 09:30 | AUD | CPI (YoY) (Q2) | – | 5.4% | 5.6% |
| 20:00 | USD | Building Permits | – | 1.440M | 1.496M |
| 22:00 | USD | New Home Sales (Jun) | – | 772K | 763K |
| 22:30 | CrudeOIL | Crude Oil Inventories | – | – | -0.708M |
| Thursday – 27 July 2023 | |||||
| 02:00 | USD | FOMC Statement | -“ | – | – |
| 02:00 | USD | Fed Interest Rate Decision | – | 5.50% | 5.25% |
| 02:30 | USD | FOMC Press Conference | – | – | – |
| 20:15 | EUR | ECB Interest Rate Decision (Jul) | – | 4.25% | 4.00% |
| 20:30 | USD | Core Durable Goods Orders (MoM) (Jun) | – | -0.1% | 0.6% |
| 20:30 | USD | GDP (QoQ) (Q2) | – | 1.8% | 2.0% |
| 20:30 | USD | Initial Jobless Claims | – | 233K | 228K |
| 20:45 | EUR | ECB Press Conference | – | – | – |
| 22:00 | USD | Pending Home Sales (MoM) (Jun) | – | 0.1% | -2.7% |
| Friday – 28 July 2023 | |||||
| 11:00 | JPY | BoJ Monetary Policy Statement | – | – | – |
| 11:00 | JPY | BoJ Interest Rate Decision | – | -0.10% | -0.10% |
| 14:00 | JPY | BoJ Press Conference | – | – | – |
| 20:00 | EUR | German CPI (MoM) (Jul) | – | 0.3% | 0.3% |
| 20:30 | USD | Core PCE Price Index (MoM) (Jun) | – | 0.2% | 0.3% |
| 20:30 | USD | Core PCE Price Index (YoY) (Jun) | – | – | 4.6% |
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