25 October 2021 Weekly Analysis
GCMAsia Weekly Report: October 25 – 29
Market Review (Forex): October 18 – 22
US Dollar
The dollar index which traded against a basket of six major currency pairs extend its losses last week over the backdrop of a string of bearish economic data as well as dovish statement from Federal Reserve, which diminishing hopes for raising interest rate in short-term basis while prompting the US Treasury yields decreased last week. The Dollar Index was closing its price on last Friday session at the price of 93.55.
Last week, the Federal Reserve unleashed their dovish statement, which diminishing hopes for raising interest rates in short-term basis. According to Reuters, Federal Reserve Chair Jerome Powell claimed on Friday that the U.S. Central Bank should start the process of tapering its earlier massive bond purchasing program during November but added that it is still not time to increase interest rates yet. The Fed had promised to maintain their benchmark overnight interest rate at the current near-zero level until the economy has recovered to full employment despite the inflation rate is still staying moderately above the central bank’s 2% goal. More than half of Fed policymakers speculated a rate hike will be needed in 2022, with a few suggesting it may have to come by the summer. Besides, the US Dollar extend its losses following the data showed that the US homebuilding unexpectedly fell in September amid acute shortages of raw materials and labor, spurring negative prospect toward the economic momentum in the United States. According to Census Bureau, U.S. Building Permits notched down significantly from the previous reading of 1.721M to 1.1589M, missing the market forecast at 1.680M. Besides, the U.S. Philadelphia Fed Manufacturing Index came in at only 23.8, which also fared worse than market expectation at 25.0. Richmond Fed President Thomas Barkin claimed on Tuesday that the U.S. labor shortages issues may outlast the coronavirus pandemic and limit overall growth for the United States unless the country comes up with better paid to boost the number of people to work due to the recent high inflation risk
Nonetheless, the Federal Reserve officials will start to discuss the future monetary policy decision during November. Economist speculated the Federal Reserve might announce to taper their bond buying program while signaling the timeframe for increasing the interest rate in future. Hence, as for now investors would continue to remain their focus to the latest updates with regards of monetary statement from Fed as well as further economic data 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 113.45. The overall bearish momentum for the pair of USD/JPY last week was mainly due to the depreciation of US Dollar. Nonetheless, the losses experienced by the pair of USD/JPY was limited by the weakening Japanese Yen. The demand for the safe-haven yen remained weak amid risk-on sentiment in the financial market following the US stock index reached an intraday record high last week. Investors remained optimism toward the better-than-expected third-quarter earnings from US companies. Despite some U.S. companies have been citing supply chain problems and higher costs earlier, they seem to be able to maintain profit margin by passing on costs to customers.
EUR/USD
The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.1585. The overall momentum for the Euro remained bullish last week was mainly due to the depreciation of US Dollar. Besides, the Euro extend its gains over the backdrop of bullish economic data. According to Markit Economics, Germany Manufacturing Purchasing Managers Index (PMI) came in at 58.2, exceeding the market forecast at 56.5.
GBP/USD
The pair of GBP/USD had surged last week while closing its market price at 1.3760. The Pound Sterling was traded flat last week over the backdrop of mixed economic data. On data front, the Office for National Statistics reported that U.K. Retail Sales data for last month came in at -0.2%, missing the market forecast at 0.5%. Nonetheless, U.K Composite Purchasing Managers’ Index (PMI) notched up significantly from the previous reading of 54.9 to 56.8, better than the market forecast at 54.0, according to Markit Economics. On the monetary policy front, the Guardian reported that economist see a November rate hike as a 56% possibility. Nonetheless, the overall statement from the Bank of England still remained vague hence investors would scrutinize the latest updates with regards of monetary policy decision to receive further trading signal. The Monetary Policy Committee is due to meet in mid-December to discuss about the impact of post-Covid employment rate, and whether supply chain problems would be improved in future to decide the implementation of contractionary monetary policy.
Market Review (Commodities): October 18 – 22
GOLD
Gold price have surged last week with the price of $1792.75 per troy ounce amid the dovish expectation from Fed in future, which increase the appeal for the safe-haven gold. The overall momentum for the gold remained bullish last week following the Federal Reserve shifted their earlier hawkish stance into dovish stance last Friday. Nonetheless, the overall sentiment form Federal Reserve remained vague, investors would continue to remain their focus toward the monetary policy statement from Fed in order to receive further trading signal. If Federal Reserve start to taper their aggressive monetary policy, it could reduce the money circulation in the global financial market, which diminishing the inflation risk in future while dragging down the appeal for the safe-haven gold.
CrudeOIL
The price of crude oil surged significantly last week while closing last Friday session with the price of $83.00. The oil market maintained its bullish trend amid reducing Covid-19 cases as well as rapid-vaccination program around the world had continue to insinuate positive prospect toward the demand of this black-commodity. Besides, the crude oil price extends its gains over the backdrop of upbeat inventory data. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories came in at -0.431M, better than the market forecast at 1.857M.
Weekly Outlook: October 25 – 29
For the week ahead, investors would continue to focus on crucial economic data such as the Initial Jobless Claims 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: October 25 – 29
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 25th October 2021 | |||||
| 16:00 | EUR | German Ifo Business Climate Index (Oct) | – | 97.9 | 98.8 |
| Tuesday – 26th October 2021 | |||||
| 22:00 | USD | CB Consumer Confidence (Oct) | – | 108.8 | 109.3 |
| 22:00 | USD | New Home Sales (Sep) | – | 755K | 740K |
| Wednesday – 27th October 2021 | |||||
| 08:30 | AUD | CPI (QoQ) (Q3) | – | 0.80% | 0.80% |
| 20:30 | USD | Core Durable Goods Orders (MoM) (Sep) | – | 0.40% | 0.30% |
| 22:00 | CAD | BoC Monetary Policy Report | – | – | – |
| 22:00 | CAD | BoC Interest Rate Decision | – | 0.25% | 0.25% |
| 22:30 | USD | Crude Oil Inventories | – | 1.857M | -0.431M |
| 23:00 | CAD | BOC Press Conference | – | – | – |
| Thursday – 28th October 2021 | |||||
| Tentative | JPY | BoJ Monetary Policy Statement | – | – | – |
| Tentative | JPY | BoJ Outlook Report (YoY) | – | – | – |
| 15:55 | EUR | German Unemployment Change (Oct) | – | -20K | -30K |
| 19:45 | EUR | ECB Interest Rate Decision (Oct) | – | – | – |
| 20:30 | USD | GDP (QoQ) (Q3) | – | 2.80% | 6.70% |
| 20:30 | USD | Initial Jobless Claims | – | 292K | 290K |
| 20:30 | EUR | ECB Press Conference | – | – | – |
| 22:00 | USD | Pending Home Sales (MoM) (Sep) | – | 0.50% | 8.10% |
| Friday – 29th October 2021 | |||||
| 08:30 | AUD | Retail Sales (MoM) (Sep) | – | 0.20% | – |
| 16:00 | EUR | German GDP (QoQ) (Q3) | – | 2.20% | 1.60% |
| 17:00 | EUR | CPI (YoY) (Oct) | – | 3.70% | 3.40% |
| 20:30 | CAD | GDP (MoM) (Aug) | – | 0.70% | -0.10% |