27 March 2023 Weekly Analysis
GCMAsia Weekly Report: March 27 – 31
Market Review (Forex): March 20 – 24
US Dollar
The Dollar Index, which is traded against a basket of six major currencies, lost its ground and hit 8 weeks low last week amid ongoing woes in the US banking sector, although the Federal Reserve has carried out expected rate hike.
Last week, the dollar index slumped on Thursday after Fed released its interest rate decision. The US central bank decided to raise its cash rate by 25 basis points to 5.00%, which is in line with the anticipation of consensus. After that, the following Press Conference presented by Fed Chairman gave some clues on the future rate hike path. The Federal Reserve Chair Jerome Powell has claimed that it might be one more rate hike would be implemented by the end of 2023. However, he also signaled that it could represent an initial stopping point for the rate hike path. Prior to that, the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank had shown that the recession in the US was becoming more serious, whereas another historical financial crisis would likely occur. With that, Fed officials decided to scale down the rate hike pace in order to avoid the exacerbation of the banking crisis while dragging down the appeal of the US Dollar. Nonetheless, it is noteworthy that the inflation fight does not over, said Jerome Powell.
However, the table was flipped over as the market’s risk aversion raised following the fresh fears in the European banking sector. Going forward, the market participants will eye on the upcoming GDP data and Core PCE data in order to gauge the further direction of the dollar index.
USD/JPY
The pair of USD/JPY was traded lower last week while closing its market price at 130.60. The bearish momentum was mainly attributed to the weakness of the Greenback. Last week, Federal Reserve decided to raise its cash rate by 25 basis points to 5.00%, as widely expected. However, in a press conference, Federal Reserve Chair Jerome Powell claimed that it might be one more rate hike would be implemented by the end of 2023. With that, it also could be interpreted that the rate hike path will be stopped soon.
EUR/USD
The pair of EUR/USD jumped last week while closing its market price at 1.0760. The EURUSD received significant bullish momentum after the Federal Reserve signaled that there would be only one more rate hike by the end of 2023. Following the fresh fears in the European banking sector, the Euro currency lost its ground and plunged significantly. According to Reuters, the cost of insuring the Deutsche Bank’s debt against the risk of default rose higher than a four-year high, leading the share of the bank to slump on the day. Deutsche Bank’s credit default swaps (CDS) – a form of insurance for bondholders, had shot up above 220 basis points from 142 bps just two days ago, which is the most since late 2018, based on data from S&P Market Intelligence. With that, it indicated that the European banks would likely to face a financial crisis that could lead to bankruptcy, just as Silicon Valley Bank and Signature Bank did two weeks ago. As a consequence, Euro has lost its appeal against the other currencies, while the market participants preferred to purchase the safe-haven dollar to avoid uncertainty.
GBP/USD
The pair of GBP/USD extended its gains last week while ending last week’s session at the price of 1.2240. The GBPUSD received significant bullish momentum last week following the interest rate decision from the Bank of England. The UK central bank unanimously agreed to increase the interest rate by 25 basis points to 4.25%, in line with the consensus forecast. Besides, the still-high CPI figure continued to spark bullish momentum in the pound market. According to the Office for National Statistics, the UK CPI came in at 10.4%, higher than the consensus forecast at 9.9%, mirroring the inflationary pressures in the UK remains buoyed.
Market Review (Commodities): March 20 – 24
GOLD
Gold prices seesawed while closing its market price at $1975.50 per troy ounce. Earlier last week, the gold prices plunged as the banking sector fears eased following the takeover of Credit Suisse by UBS and floated the US financial market with additional cash. However, the gold managed to regain its luster after the cost of insuring the Deutsche Bank’s debt against the risk of default rose higher than a four-year high, leading the share of the bank to slump last Friday. With such a backdrop, it raised market concerns over the possibility of renewed banking jitters in EU. The heightening of market uncertainty urged the market participants to rush into the safe haven asset in order to avoid the risk of crisis.
CrudeOIL
Crude oil prices surged while ending last week’s session at the price of $69.20 per barrel. The oil prices experienced huge buying momentum throughout the week as banking worries eased. Last week, the US new funding facility and the takeover of Credit Suisse by UBS reduced the market fears over the contagion of bank jitters. However, the contagion fears renewed following the steep rise in the cost to insure bondholders against the bank defaulting on its debts, known as credit default swaps. With that, it tampered the market confidence toward the oil products, causing a huge decline in oil prices last Friday.
Weekly Outlook: March 27 – 31
For the week ahead, investors will continue to focus on crucial economic data such as US GDP Core PCE Index this week in order to determine further direction. Besides that, the ongoing situation with the Ukraine-Russia war will also be in the eyes of investors.
As for oil traders, they will be eyeing on US inventory level reported by API and EIA to gauge the strength of crude demand for the world’s largest oil consumer.
Highlighted economy data and events for the week: March 27 – 31
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 27th March 2023 | |||||
| 16:00 | EUR | German Ifo Business Climate Index (Mar) | – | 91 | 91.1 |
| Tuesday –28th March 2023 | |||||
| 1:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 8:30 | AUD | Retail Sales (MoM) (Feb) | – | 0.40% | 1.90% |
| 16:45 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 19:00 | BRL | BCB Copom Meeting Minutes | – | – | – |
| 21:15 | EUR | ECB President Lagarde Speaks | – | – | – |
| 22:00 | USD | CB Consumer Confidence (Mar) | – | 101 | 102.9 |
| Wednesday – 29th March 2023 | |||||
| 3:30 | USD | API Weekly Crude Oil Stock | – | – | 3.262M |
| 22:00 | USD | Pending Home Sales (MoM) (Feb) | – | -3.00% | 8.10% |
| 22:30 | USD | Crude Oil Inventories | – | – | 1.117M |
| Thursday – 30th March 2023 | |||||
| Tentative | GBP | BOE Inflation Letter | – | – | – |
| 20:00 | EUR | German CPI (YoY) (Mar) | – | 7.30% | 8.70% |
| 20:30 | USD | GDP (QoQ) (Q4) | – | 2.70% | 3.20% |
| 20:30 | USD | Initial Jobless Claims | – | 196K | 191K |
| Friday – 31st March 2023 | |||||
| 9:30 | CNY | Manufacturing PMI (Mar) | – | 50.5 | 52.6 |
| 14:00 | GBP | GDP (YoY) (Q4) | – | 0.40% | 0.20% |
| 14:00 | GBP | GDP (QoQ) (Q4) | – | -0.20% | -0.20% |
| 15:55 | EUR | German Unemployment Change (Mar) | – | 3K | 2K |
| 17:00 | EUR | CPI (YoY) (Mar) | – | 7.20% | 8.50% |
| 20:30 | USD | Core PCE Price Index (MoM) (Feb) | – | 0.40% | 0.60% |
| 20:30 | CAD | GDP (MoM) (Jan) | – | 0.40% | -0.10% |
| 23:00 | EUR | ECB President Lagarde Speaks | – | – | – |
Risk Statement:
Forex, Gold, Crude Oil, Commodities, CFD and all other margin trading investment products involve high level of risk and may not be suitable for all investors. Your previous investment success in stock, futures or any other investment achieved does not mean that all your future investment will obtain the same results. You should carefully consider your investment objectives; risk associated and seek professional advice before deciding to trade or if you have any doubts.