26 September 2022 Weekly Analysis
GCMAsia Weekly Report: Sept 26 – 30
Market Review (Forex): September 19 – 23
US Dollar
The Dollar Index which traded against a basket of six major currencies surged significantly last week after Federal Reserve raised its interest rate as well as giving their hawkish statement on future rate hike path, prompted investors to shift their capitals toward the US currency. The Dollar Index has closed its market price at 112.74.
Last week, Fed had released its interest rate decision which increased by 75 basis point to 3.25% for the third consecutive time. Before the rate hike, most of the market participants had anticipated that the third-quarter percentage of rate increase would highly implemented, while part of investor were expecting a higher rate hike, says full-percentage. After the meeting, the Monetary Policy Committee (MPC) had claimed that aggressive rate hike path would be continue in order to stabilize the soaring inflation risk. The MPC also claimed that the Fed could lift the rate by at least another 125-basis point by the end of 2022, to a range between 4.25% and 4.5%, according to Fed new projections. Besides that, according to Reuters, the Fed Chair Jerome Powell claimed that the Fed will act aggressively now to stabilize the inflation rate into 2%. Currently, the rate cuts are not expected until the year of 2024. At this juncture, several Federal Reserve members are expected to speak this week, while other crucial economic data from US region would be also the main focus for the global investors to gauge the likelihood movement for the US Dollar. In addition, the US Dollar extended its gains following the rising tensions between Russia-Ukraine and heightened economy recession in UK, which prompted investors to flee into safe-haven assets such as US Dollar.
USD/JPY
The pair of USD/JPY appreciated last week while closing its market price at 143.47. The pair of USD/JPY received bullish momentum on the last week trading session amid the strengthening of US Dollar. Nonetheless, the gains experienced by the pair was limited over the intervention of Japan government and central bank. According to Reuters, the Japan government and central bank intervened forex market by buying its nation currency, Yen, in order to support the weakening nation currency. Bank of Japan (BoJ) remained its loosening monetary policy has pressured the value of Yen against US Dollar, which led Japan to intervene the market. Besides that, Prime Minister of Japan Fumio Kishida claimed on yesterday that the government would highly eye on the exchange rate of its currency and they might implement intervention again if necessary. As Japanese currency supported by its government, it prompted investors to shift their capitals toward Yen.
EUR/USD
The pair of EUR/USD depreciated last week while closing its market price at 0.9679. The overall bearish trend for the pair of EUR/USD was mostly due to the strengthening US Dollar. The interest rate US has reached 3.25% while the EU interest rate is about 1.25%. Since the US rate can provide higher return for investors, they are tended to purchase US Dollar which having better prospects, spurred bearish momentum on the Euro. As of now, the market participants would highly focus on the release of CPI data which scheduled on 30 September in order to anticipate the rate hike decision of ECB in the upcoming meeting.
GBP/USD
The pair of GBP/USD slumped last week while ending last week session at the price of 1.0789. The Pound Sterling was sold off by majority of investors after Bank of England (BoE) has announced its interest rate decision. BoE take a further tightening step on the interest rate from 1.75% to 2.25%, missing minority of the investors expectation who having the thought of a 0.75% move. On the economic data front, a series of downbeat economic data such as UK Composite Purchasing Managers’ Index and Services Purchasing Managers Index had been released, hinted that the economy in UK was entering into recession, dragged down the value of Pound. On the other hand, the GBP/USD extended its losses after UK government announced to apply tax cut to tackle recession. Based on the announcement, a reduction in the basic rate of income tax from 20% to 19% has implemented. Also, they have cancelled a planned rise in corporation tax to 25% and keeping it at 19%, the tax paid on incomes over high income groups would take a top rate of 40%. Tax cuts would increase consumer spending in the nation. However, in the perspective of investors, the move from the UK government would likely to reduce nation’s income, which make the economic progression in UK become pessimistic.
Market Review (Commodities): September 19 – 23
GOLD
Gold price depreciated last week while closing its market price at $1643.81 per troy ounces. The gold price had a sharp decline on last week amid the background of the continuing of aggressive rate hike path from Fed. Thus, investors tend to shift their capitals toward yielding-assets such as US Dollar. Though, the losses of gold price was limited over the rising conflict between Russia-Ukraine. Last week, Russia’s President Vladimir Putin announced a partial military mobilization in Russia, which indicated that the invasion of Ukraine continues. He also claimed that the Russia is willing to use nuclear weapons if Ukraine continues its offensive operations, according to the Guardian. As the war between Russia and Ukraine heated up, it prompted investors to shift their capitals toward safe-haven assets such as gold.
CrudeOIL
Crude oil price eased while ending last week session at the price of $79.40 per barrel. The crude oil price was edged lower last week amid the surge in greenback value urged the non-US oil buyer to temporarily shy away from the black commodity as a more expensive price compared to usual. Besides that, the major central banks such as Fed and BoE has raised its interest rate, which would likely to weigh down the global demand on this black commodities as the rising interest rate would lead to economic recession in the short-term period. However, the losses of oil price was limited as the US Crude Oil Inventories increased by 1.142M barrels, far lower than 2.161M barrels which market expected.
Weekly Outlook: September 26 – 30
For the week ahead, investors would continue to focus on crucial event such as the Fed Chair Powell Speaks this week 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: September 26 – 30
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 26th September 2022 | |||||
| 14:00 | EUR | German GDP (QoQ) (Q3) | – | 0.1% | 0.1% |
| 16:00 | EUR | German Ifo Business Climate Index (Sep) | – | 87.0 | 88.5 |
| 21:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| Tuesday – 27th September 2022 | |||||
| 19:30 | USD | Fed Chair Powell Speaks | – | – | – |
| 19:30 | EUR | ECB President Lagarde Speaks | – | – | – |
| 20:30 | USD | Core Durable Goods Orders (MoM) (Aug) | – | 0.2% | 0.2% |
| 22:00 | USD | CB Consumer Confidence (Sep) | – | 104.0 | 103.2 |
| 22:00 | USD | New Home Sales (Aug) | – | 500K | 511K |
| Wednesday – 28th September 2022 | |||||
| 09:30 | AUD | Retail Sales (MoM) (Aug) | – | 0.3% | 1.3% |
| 15:15 | EUR | ECB President Lagarde Speaks | – | – | – |
| 22:00 | USD | Pending Home Sales (MoM) (Aug) | – | -1.0% | -1.0% |
| 22:15 | USD | Fed Chair Powell Speaks | – | – | – |
| 22:30 | CrudeOIL | Crude Oil Inventories | – | – | 1.142M |
| Thursday – 29th September 2022 | |||||
| 20:30 | USD | GDP (QoQ) (Q2) | – | 8.9% | 9.0% |
| 20:30 | USD | Initial Jobless Claims | – | 215K | 213K |
| 20:30 | CAD | GDP (MoM) (Jul) | – | -0.1% | 0.1% |
| 21:00 | NZD | RBNZ Gov Orr Speaks | – | – | – |
| Friday – 30th September 2022 | |||||
| 09:30 | CNY | Manufacturing PMI (Sep) | – | 49.2 | 49.4 |
| 09:45 | CNY | Caixin Manufacturing PMI (Sep) | – | 50.2 | 49.5 |
| 14:00 | GBP | GDP (YoY) | – | – | -0.1% |
| 15:55 | EUR | German Unemployment Change (Sep) | – | 20K | 28K |
| 17:00 | EUR | CPI (YoY) (Sep) | – | 9.6% | 9.1% |
| 20:30 | USD | Core PCE Price Index (MoM) (Aug) | – | 0.4% | 0.1% |
| 22:00 | USD | Michigan Consumer Sentiment (Sep) | – | 59.5 | 59.5 |
Risk Statement:
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