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27 June 2022                           Weekly Analysis

GCMAsia Weekly Report: June 27 – July 1

Market Review (Forex): June 20 – 24

US Dollar

The Dollar Index which traded against a basket of six major currencies retreated from its higher-level last week as market participants continue to assess the prospect of major central bank rate hikes to curb spiking inflation rate. Though, the easing fears upon the hyperinflation had reduced the odds for the implementation of rate hike from Fed, dragging down the demand on the US Dollar. The Dollar Index has closed its market price at 103.70.

 

Recently, the reducing in oil and commodities price last week had eased inflation fears while sparkling further risk appetite in the global financial market, prompting investors to shift their portfolio toward other riskier equity markets. In addition, easing inflation expectation had prompted the 10-year US Treasury yield declined on last week. Nonetheless, as for now the US Fed Fund Futures on Friday speculated a 73.5% probability of 75 basis-point rate hike at July meeting. On the monetary policy front, the overall statement from the Fed’s Monetary Policy Committee (MPC) skewed into hawkish tone despite the recession risk continue to linger in the global financial market. According to CNBC, the Federal Reserve Chairman Jerome Powell acknowledged that despite sharply rising in interest rates could push up unemployment and recession risk, though it is still crucial for the Federal Reserve to restore the price stability.

 

Though, the losses experienced by the US Dollar was limited by the bullish housing data last week. According to the latest statistics, US Existing Home Sales and US New Home Sales came in at 5.41M and 696K, which fared better-than-expectation at 5.39M and 588K respectively. As for now, investors would continue to eye on the latest monetary policy decision from Fed as well as further crucial inflation data to gauge the likelihood movement for the US Dollar.

 

USD/JPY

The pair of USD/JPY slumped last week while closing its market price at 134.70. The overall bearish momentum for the pair of USD/JPY was mostly due to the depreciation of US Dollar. Nonetheless, the market demand toward the Japanese Yen remained weak amid market participants expected the Bank of Japan would likely to maintain the expansionary monetary policy to boost up the economic progression. In earlier, Bank of Japan vowed to maintain its ultra-low interest rate while maintaining its cap on the 10-year bond yield with unlimited bond buying program.

 

EUR/USD

The pair of EUR/USD surged last week while closing its market price at 1.0565. The overall trend for Euro remained bullish amid the rate hike expectation from the European Central Bank. As for now, the European Central Bank had vowed to increase their interest rate by 25 basis point in July, tis first-rate hike in 11 years in order to curb the rising inflation risk. Though, the gains experienced by the Euro was limited by the bearish economic data. According to Markit Economics, Germany Manufacturing Purchasing Managers Index (PMI) notched down significantly from the previous reading of 54.8 to 52.0, missing the market forecast at 54.0. Meanwhile, France Manufacturing Purchasing Managers Index (PMI) came in at 51.0, which also fared worse-than-expectation at 54.0.

 

GBP/USD

The pair of GBP/USD appreciated last week while ending last week session at the price of 1.2285. The overall trend for the pair of GBP/USD remained bullish last week amid the weakening US Dollar. Though, the economic prospect in the UK region remained negative following the UK inflation hit new record high in May, which spurring further stagflation risk in future while dragging down the appeal for the Pound Sterling. According to Office for National Statistics, UK Consumer Price Index notched up significantly form the previous reading of 9.0% to 9.1%, aligned with the market expectation. UK’s Office for National Statistics claimed that they predicted the inflation rate in UK would reach nearly 11% in January. Besides, economists have also flagged signs of a tightening of labor market conditions and recession risk in the UK region.

 

Market Review (Commodities): June 20 – 24

GOLD

Gold price depreciated last week while closing its market price at $1835.47 per troy ounces. The gold market received significant bullish momentum following the rising tensions between Russia-Ukraine, which stoked a shift in sentiment toward safe-haven commodity such as gold. According to Reuters, Russian missiles struck the Ukrainian capital Kyiv on Sunday despite the G7 leaders gather in Europe to discuss further sanctions against Moscow. Besides, the leaders of the G7 nations also reiterated that they will ban on Russian gold imports for Moscow’s unprovoked invasion of Ukraine. As for now, investors would continue to eye on the Russia-Ukraine development as well as the monetary policy from the global central bank to receive trading signal on gold.

 

CrudeOIL

Crude oil price surged while ending last week session at the price of $107.65 per barrel. Crude oil price received bullish momentum last week amid the heightening tensions Russia-Ukraine continue to spark supply uncertainty for the crude oil in future. Nonetheless, the gains experienced by the crude oil price was limited by the bearish inventory data. According to American Petroleum Institute (API), US API Weekly Crude Oil Stock came in at 5.607M, higher than the market forecast at -1.433M.

 

Weekly Outlook: June 27 – July 1

For the week ahead, investors would continue to focus on crucial economic data such as the US GDP data 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: June 27 – July 1

Time Market Event Actual Forecast Previous
Monday – 27th June 2022
20:30 USD Core Durable Goods Orders (MoM) (May) 0.3% 0.4%
22:00 USD Pending Home Sales (MoM) (May) -4.0% -3.9%
Tuesday – 28th June 2022
02:30 EUR ECB President Lagarde Speaks
16:00 EUR ECB President Lagarde Speaks
22:00 USD CB Consumer Confidence (Jun) 100.9

 

106.4
Wednesday – 29th June 2022
04:30 USD API Weekly Crude Oil Stock 5.607M
09:30 AUD Retail Sales (MoM) (May) 0.4% 0.9%
19:35 GBP BoE Gov Bailey Speaks
20:30 USD GDP (QoQ) (Q1) -1.5% -1.5%
21:00 USD Fed Chair Powell Speaks
21:00 EUR ECB President Lagarde Speaks
21:30 GBP BoE Gov Bailey Speaks
22:30 USD Crude Oil Inventories 1.956M
23:00 EUR ECB President Lagarde Speaks
Thursday – 30th June 2022
09:30 CNY Manufacturing PMI (Jun) 48.6 49.6
14:00 GBP GDP (QoQ) (Q1) 8.7% 8.7%
15:55 EUR German Unemployment Change (Jun) -6K -4K
20:30 USD Initial Jobless Claims 227K 229K
20:30 CAD GDP (MoM) (Apr) 0.3% 0.7%
Friday – 1st July 2022
07:50 JPY Tankan Large Manufacturers Index (Q2) 13 14
07:50 JPY Tankan Large Non-Manufacturers Index (Q2) 14 9
09:45 CNY Caixin Manufacturing PMI (Jun) 48.1
15:55 EUR German Manufacturing PMI (Jun) 52.0 52.0
16:30 GBP Manufacturing PMI (Jun) 53.4 53.4
17:00 EUR CPI (YoY) (Jun) 8.3% 8.1%
22:00 USD ISM Manufacturing PMI (Jun) 55.0 56.1