25 April 2022 Weekly Analysis
GCMAsia Weekly Report: April 25 – 29
Market Review (Forex): April 18 – 22
US Dollar
The Dollar Index which traded against a basket of six major currencies received significant bullish momentum last week amid the backdrop of hawkish tone from Federal Reserve, which prompting investors to shift their capitals toward US Dollar. The Dollar Index has closed its market price at 101.13.
Last week, the US Dollar index extended its gains following the Federal Reserve Chair Jerome Powell unleashed his hawkish tone toward the economic progression in the United States. According to Reuters, Federal Reserve Chair Jerome Powell confirmed a 50-basis point of rate hike during the monetary policy meeting next month, including consecutive rate increases in the year of 2022. Fed funds futures have started to speculate a three straight 50 basis-point interest rate hikes starting with next month’s policy meeting. With inflation running roughly three times higher than the Fed’s target, it would prompt the Fed to be tightening the monetary policy in more aggressive ways to stabilize the inflation risk. Besides, 10-year Treasury yield used to rise to 2.94% over the Powell’s comments on rate hikes. The rate hike decision from Federal Reserve would likely to diminish US Dollar circulation in the market, sparkling the appeal for the US Dollar.
Nonetheless, the gains of US Dollar was limited amid the backdrop of passive economic data. According to National Association of Realtors, US Existing Home Sales notched down from the previous reading of 5.93M to 5.77M, which lower than than the market forecast of 5.80M. Existing Home Sales measures the change in the annualized number of existing residential buildings that were sold during the previous month. The downbeat economic data dialed down the market optimism toward economic progression in US region, spurring bearish momentum on the US Dollar.
USD/JPY
The pair of USD/JPY extended its gains last week while closing its market price at 128.57. The pairing received bullish momentum amid the backdrop of Bank of Japan (BoJ) remained its dovish tone, as it was committed to keeping monetary policy loose, and it had made two offers to buy an unlimited amount of government bonds with maturities of more than five years and up to 10 years. Besides, according to Reuters, Wells Fargo Securities’ Brendan McKenna had claimed that the Japanese yen may continue to see weakness against the US dollar if the policies of the Bank of Japan and Federal Reserve continue to diverge, prompting investors to purchase US Dollar which having better prospects and selloff Japanese Yen.
EUR/USD
The pair of EUR/USD edged down last week while closing its market price at 1.0794. The Euro received bullish momentum following the pre-election debate on French on 21 April. According to Reuters, the French President Emmanuel Macron was found to be more convincing than far-right candidate Marine Le Pen in a pre-election debate on French television ahead of Sunday’s presidential runoff vote. The snap survey by Elabe for BFM TV found that 59% of polled viewers found Macron more convincing than Le Pen. Polls of voting intentions for the April 24 election estimate that Macron will win with around 55.5% of the vote. In the year of 2017, Macron beat Le Pen with 66.1% of the vote. Investors remained optimism that if Emmanuel Macron re-elected to become French President, it would more likely to reduce further geopolitical risk in France while spurring positive prospect on the economic progression in European region. However, Euro retreated from its overnight gains amid the backdrop of dovish statement from European Central Bank (ECB). According to Reuters, ECB President Christine Lagarde claimed that the ECB may need to downgrade its growth outlook further amid the rising tensions between Russia-Ukraine continue to dial down the market optimism toward the economic progression in the European region. The Money Markets, which had eased rate hike expectation following the ECB meeting, were now pricing in a more than 20 basis-point (bps) rate hike by July and nearly 80 basis point of rate hike by year-end, which dragged down the appeal for the Euro.
GBP/USD
The pair of GBP/USD depreciated last week while ending last week session at the price of 1.2838. The Pound received bearish momentum last week following the passive economic data. According to Office for National Statistics, UK Retail Sales MoM recorded at the reading of -1.4%, which lower than the previous reading of -0.5% and -0.3%. Besides, UK Composite Purchasing Managers’ Index (PMI) had notched down from the previous reading of 60.9 to 57.6, worse than the market forecast of 59.7, according to Markit Economics. In addition to these two economic data, UK Manufacturing Purchasing Managers Index (PMI) and UK Services Purchasing Managers Index (PMI) also did not meet market expectation. The downbeat economic data had brought negative prospects toward economic momentum in UK region, prompting investors to selloff Pound. On the other hand, the hawkish statement from Federal Reserve had stoked a shift sentiment toward US Dollar, spurring further bearish momentum on Pound.
Market Review (Commodities): April 18 – 22
GOLD
Gold price depreciated last week while closing its market price at $1932.50 per troy ounces. Gold price received bearish momentum last week following the strengthening US Dollar. The rate hike decision from Federal Reserve would likely to diminish US Dollar circulation in the market, dialed up the market optimism toward US Dollar. Besides, the rate hike decision had led to the surge of 10-year Treasury yield, prompting investors to selloff volatile assets such as gold and purchase risk-off assets such as US Treasury Bill.
CrudeOIL
Crude oil price depreciated while ending last week session at the price of $101.75 per barrel. Crude oil price received bearish momentum amid the backdrop of the investors worry about demand from China continue to weigh on the crude market, following the news that Shanghai announced a new round of Covid measures including daily coronavirus testing from 22 April, in an attempt to curb the latest outbreaks. As the pandemic Covid-19 continue in China, the economic activities in China would have been restricted, causing the demand of oil to diminish. Besides, the International Monetary Fund cut its growth forecast for China this year to 4.4% earlier this week, well below Beijing’s target, with the widespread Covid lockdowns one of the main reasons cited, putting further pressure on the crude oil price.
Weekly Outlook: April 25 – 29
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims and Fed monetary policy decision 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: April 25 – 29
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 25th April 2022 | |||||
| All Day | AUD | Australia – ANZAC Day | – | – | – |
| All Day | NZD | New Zealand – ANZAC Day | – | – | – |
| 16:00 | EUR | German Ifo Business Climate Index (Apr) | – | 89.1 | 90.8 |
| Tuesday – 26th April 2022 | |||||
| 20:30 | USD | Core Durable Goods Orders (MoM) (Mar) | – | 0.60% | -0.60% |
| 22:00 | USD | CB Consumer Confidence (Apr) | – | 108 | 107.2 |
| 22:00 | USD | New Home Sales (Mar) | – | 765K | 772K |
| Wednesday – 27th April 2022 | |||||
| 9:30 | AUD | CPI (QoQ) (Q1) | – | 1.70% | 1.30% |
| 19:30 | EUR | ECB President Lagarde Speaks | – | – | – |
| 22:00 | USD | Pending Home Sales (MoM) (Mar) | – | -1.50% | -4.10% |
| 22:30 | USD | Crude Oil Inventories | – | 2.471M | -8.020M |
| Thursday – 28th April 2022 | |||||
| 0:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 9:30 | AUD | Retail Sales (MoM) (Mar) | – | 1.00% | 1.80% |
| Tentative | JPY | BoJ Monetary Policy Statement | – | – | – |
| Tentative | JPY | BoJ Outlook Report (YoY) | – | – | – |
| Tentative | JPY | BoJ Press Conference | – | – | – |
| 20:30 | USD | GDP (QoQ) (Q1) | – | 1.10% | 6.90% |
| 20:30 | USD | Initial Jobless Claims | – | 180K | 184K |
| Friday – 29th April 2022 | |||||
| 9:45 | CNY | Caixin Manufacturing PMI (Apr) | – | 50 | 48.1 |
| 16:00 | EUR | German GDP (QoQ) (Q1) | – | 0.20% | -0.30% |
| 17:00 | EUR | CPI (YoY) (Apr) | – | 7.40% | 7.40% |
| 18:30 | RUB | Interest Rate Decision (Apr) | – | 20.00% | 17.00% |
| 20:30 | CAD | GDP (MoM) (Feb) | – | 0.80% | 0.20% |
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