25 January 2021 Weekly Analysis
GCMAsia Weekly Report: January 25 – 29
Market Review (Forex): January 18 – 22
US Dollar
The dollar index which traded against a basket of six major currency pairs was traded lower on last week amid the earlier dovish statement from the Federal Reserve and also the hopes upon the massive U.S. government stimulus plan had dragged down the appeal for the US Dollar. Nonetheless, the losses experienced by the US Dollar was limited over the backdrop of the upbeat economic data from the U.S. region on last week. The Dollar Index was closing its price on last Friday session at the price of 90.15.
As for now, the market participant speculated that the Federal Open Market Committee is likely to extend its ultra-loose monetary policy conditions within a long-term period to boost the economic momentum from the U.S. region. The expectation upon the increase in money supply as well as the lower interest would be diminishing the market demand on the US Dollar. Besides, US President Joe Biden had already proposed a $1.9 trillion Covid-19 relief bill. Hence, investors meanwhile are expecting the world economy to show strong growth for the fourth quarter, fueling hopes for a quick economic recovery while spurring the risk appetite in the FX market. Such risk-on sentiment would prompt investors to shift their portfolio from the safe-haven asset such as US Dollar to other riskier currencies. Nonetheless, the losses experienced by the US Dollar was limited following a string of upbeat crucial data from the U.S. region were released. According to National Association of Realtor, the U.S. Existing Home Sales notched up from the previous reading of 6.71M to 6.76M, exceeding the market forecast at 6.55M. Besides, the U.S. Philadelphia Fed Manufacturing Index and U.S. Building permits came in at 26.5 and 1.709M, which also fared better than market expectation at 12.0 and 1.604M respectively.
Though, investors would continue to scrutinize the latest updates with regards of the Covid-19 vaccine development, U.S. massive economic stimulus as well as further crucial economic data in order to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY received bearish momentum on last week while ending last Friday session at the price of 103.75. The overall bearish momentum for the pair was mainly due to the depreciation of the US Dollar. Besides, the uncertainty with regards of the spiking numbers of Covid-19 cases had spurred risk-off sentiment in the FX market, which insinuating market demand on the safe-haven Japanese Yen.
EUR/USD
The pair of EUR/USD surged throughout the week while ending last week session at the price of 1.2175. The euro extend its gains after European Central Bank (ECB) decided to remain it unfold monetary policy during the European Central Bank meeting last week. First, ECB maintained its interest rate at 0.00%, while continue the purchases under the pandemic emergency purchase programmed (PEPP) with a total amount of €1,850 billion until at least end of March 2022. Besides, ample of liquidity will be provided to the bank through the third series of targeted longer-term refinancing operations (TLTRO III) in order to support bank for lending firms and households. Nonetheless, chairman of ECB Christine Lagarde reiterated that the ongoing coronavirus pandemic is still posing “serious risk” to the euro zone economy while emphasizing future outlook of economy remained vulnerable as the rollout of vaccines has proven to be challenging, and behind-scheduled vaccination progress has slowed down the recovery pace of economy. As for now, investors would continue to scrutinize the latest updates with regards of the Covid-19 vaccine development in order to receive further trading single.
GBP/USD
The pair of GBP/USD was edged lower on last week while closing its market price at 1.3680. Pound Sterling received significant bearish momentum on last week over the backdrop of bearish economic data on last week. According to Office for National Statistics, the U.K. Retail Sales for last month had came in at only 0.3%, missing the market forecast at 1.2%. Besides, the U.K. Composite Purchasing Managers’ Index (PMI) notched down from the preliminary reading of 50.4 to 40.6, which also fared worse than the market expectation at 50.7. As both data fared worse than expectation, which dialed down the market optimism toward the economic progression in UK while spurring significant selloff on the Pound Sterling.
Market Review (Commodities): January 18 – 22
GOLD
Gold price surged tremendously throughout last week with the price of $1852.35 a troy ounce amid the hopes upon the massive economic stimulus plan from the United States and also expansionary monetary policy from Fed had spurred higher probability of inflation risk in future, which insinuating the market demand for the safe-haven commodity. Higher inflation would normally tend to reduce the value of currency. Hence, when inflation remains high over a longer period, gold had become an effective tool in order to hedge against the inflationary condition. As for now, investors would continue remain their focus on the latest massive U.S. economic stimulus plan from the Biden administration to receive further trading signal.
CrudeOIL
The price of crude oil slumped throughout the week while closing last Friday session with the price of $51.95 per barrel amid spiking number of Covid-19 infections had spurred market pessimism toward the crude oil demand in future. Besides, the crude oil price extends its losses over the backdrop of downbeat inventory data from EIA last week. According to Energy Information Administration (EIA), the U.S Crude Oil inventories increased significantly from the preliminary reading of -3.247M to 4.351M, much higher than the market forecast at -1.167M. Besides, the crude oil price extends its losses following some region such as UK and China had re-imposed Covid-19 restrictions, which spurring negative prospect for the crude oil demand.
Weekly Outlook: January 25 – 29
For the week ahead, investors would continue to focus on crucial economic data such as FOMC Interest rate decision and also US massive Covid-19 relief plan and in order 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: January 25 – 29
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 21hb January 2021 | |||||
| 16:45 | EUR | ECB President Lagarde Speaks | – | – | – |
| 17:00 | EUR | German Ifo Business Climate Index (Jan) | – | 91.8 | 92.1 |
| Tuesday – 26th January 2021 | |||||
| 00:15 | EUR | ECB President Lagarde Speaks | – | – | – |
| 15:00 | GBP | Average Earnings Index +Bonus (Nov) | – | 2.9% | 2.7% |
| 15:00 | GBP | Claimant Count Change (Dec) | – | – | 64.3K |
| 23:00 | USD | CB Consumer Confidence (Jan) | – | 89.0 | 88.6 |
| Wednesday – 27th January 2021 | |||||
| 08:30 | AUD | CPI (QoQ) (Q4) | – | 0.7% | 1.6% |
| 21:30 | USD | Core Durable Goods Orders (MoM) (Dec) | – | 0.5% | 0.4% |
| 23:30 | CrudeOIL | Crude Oil Inventories | – | – | -3.247M |
| Thursday – 28th January 2021 | |||||
| 03:00 | USD | FOMC Statement | – | – | – |
| 03:00 | USD | Fed Interest Rate Decision | – | 0.25% | 0.25% |
| 03:30 | USD | FOMC Press Conference | – | – | – |
| 21:30 | USD | GDP (QoQ) (Q4) | – | 4.0% | 33.4% |
| 21:30 | USD | Initial Jobless Claims | – | 878K | 900K |
| 23:00 | USD | New Home Sales (Dec) | – | 860K | 841K |
| Friday – 29th January 2021 | |||||
| 17:00 | EUR | German GDP (QoQ) (Q4) | – | – | 8.5% |
| 17:00 | EUR | German Unemployment Change (Jan) | – | 3K | -37K |
| 21:30 | CAD | GDP (MoM) (Nov) | – | 0.4% | 0.4% |
| 23:00 | USD | Pending Home Sales (MoM) (Dec) | – | -0.6% | -2.6% |