27 December 2021 Weekly Analysis
GCMAsia Weekly Report: December 27 – 31
Market Review (Forex): December 20 – 24
US Dollar
The dollar index which traded against a basket of six major currency pairs retreats over the backdrop of risk-n sentiment in the global financial market following the upbeat news with regards of the Covid-19 treatment pill. Nonetheless, the losses experienced by the US Dollar was limited amid upbeat economic data last week. The Dollar Index has ended last week session at the price of 96.05.
On the Covid-19 pandemic front, the US Food and Drug Administration on Thursday had authorized Merk’s and Pfizer antiviral Covid-19 pill. According to the Guardian, the clinical trials data had shown that both Pfzer and Merck offered 89% reduction in the risk of hospitalization for unvaccinated patients when the patients began treatment within three days of the first symptoms appearing. Merck’s lowered the risk by 30% for patient who began treatment within five days of symptoms appearing. Besides, the US Government has ordered 10 million courses of the Pfizer pill and 3 million from Merck, according to Bloomberg. Though, in short-term basis the medicines are still not expected to immediately be widely available. In fact, fresh data from Denmark, U.K. and South Africa had shown evidence that the new Omicron strain is less likely to cause severely illness. Meanwhile, AstraZeneca, Pfizer and Moderna trial results indicated that a booster jab of their Covid-19 vaccine largely restored the immune response to the new variant. Though, the US Dollar received some bullish momentum following United States released a string of bullish economic data. According to Census Bureau, U.S. Core Durable Goods Order for last month notched up significantly from the previous reading of 0.3% to 0.8%, exceeding the market forecast at 0.6%. Meanwhile, U.S. Gross Domestic Product (GDP) for last quarter came in at 2.3%, which also fared better than market expectation at 2.1%.
Nonetheless, the overall movement for the Dollar Index remain subdued as many markets are closed or operating with reduced hours due to holidays session. As for now, investors would continue to scrutinize the latest updates with regards of further crucial economic data and Covid-19 development in order to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY received bullish momentum on last week while ending last Friday session at the price of 114.40. The overall bullish momentum for the pair of USD/JPY last week was mainly due to the depreciation of Japanese Yen. The Japanese Yen received significant bearish momentum following the Japan’s cabinet approved an annual budget of $940 billion that is a record for a tenth straight year, underscoring a priority of boosting the economic momentum in Japan region. Investors remained concerns that such significant government spending combined with the ultra-loose monetary policy would cause the Bank of Japan to release more money circulation into the economy, which leads to higher inflation rate in future. Public debt in Japan as for now is more than twice the size of its $5 trillion economy, the highest among industrialized countries. Higher money circulation as well as rising inflation risk would be spurring negative prospect for the Japan economy, which dragging down the value for the Japanese Yen.
EUR/USD
The pair of EUR/USD surged throughout the week while ending last week session at the price of 1.1330. The overall momentum for the Euro remained bullish amid depreciation of US Dollar. Nonetheless, the gains experienced by the Euro was limited following a number of countries across Europe have implemented new social-distancing measures to stop surging Covid-19 infections driven by the Omicron variant. Countries including Belgium, Netherlands and Germany are introducing post-Christmas restrictions, which shutting nightclubs, limiting gathering in restaurants and cancelling large-scale events.
GBP/USD
The pair of GBP/USD surged last week while closing its market price at 1.3395. Pound Sterling received bullish momentum last week over the backdrop of upbeat economic data. According to Office for National Statistics, U.K. Gross Domestic Product (GDP) came in at 6.8%, exceeding the market forecast at 6.6%, which indicating the U.K. economy has recovered from the pandemic faster than market expectation. Nonetheless, the gains experienced by the Pound Sterling was limited by the spiking numbers of Omicron variant across the UK region. According to the Guardian, the daily cases of Covid-19 have passed 100,000 as the Omicron variants sweeps across U.K., reaching the highest number recorded since the pandemic began. Such sentiment would increase the odds for the U.K. authorities to re-impose the early lockdown restriction, which dialed down the market optimism toward economic progression in United Kingdom.
Market Review (Commodities): December 20 – 24
GOLD
Gold price surged last week with the price of $1808.00 per troy ounce amid spiking numbers of Covid-19 cases around the world had prompted some countries to re-impose lockdown restrictions, which disrupting the global supply chain and leads to labor shortages around the world. Nonetheless, the gains experienced by the safe-haven gold was limited by the hawkish expectation from Federal Reserve. In earlier, the Federal Reserve decided to maintain their fed funds rate at 0 to ¼% while lowering the bond buying program from the earlier December’s rate of 90 billion to 60 billion per month. Once the bond program wraps up, the central bank expects to start raising interest rate. Projections released overnight indicate Fed could have three rate hikes coming in 2022, with two in the following year and two more in 2024. Rising interest rates and reduction of bond buying program would reduce the money circulation in the global financial market, dragging down the appeal for the safe-haven gold.
CrudeOIL
The price of crude oil slumped last week while closing last Friday session with the price of $72.70. The oil market edged lower amid rising numbers of Covid-19 Omicron variant around the world had continue to spur negative prospect for this black-commodity. Nonetheless, the losses experienced by the crude oil commodity was limited over the backdrop of bullish inventory data last week. According to Energy Information Administration (EIA), U.S. Crude Oil Inventories came in at -4.715M, better than the market forecast at -2.750M.
Weekly Outlook: December 27 – 31
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: December 27 – 31
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 27th December 2021 | |||||
| N/A | |||||
| Tuesday – 28th December 2021 | |||||
| N/A | |||||
| Wednesday – 29th December 2021 | |||||
| 23:00 | USD | Pending Home Sales (MoM) (Nov) | – | 0.6% | 7.5% |
| 23:30 | CrudeOIL | Crude Oil Inventories | – | – | -4.715M |
| Thursday –30th December 2021 | |||||
| 21:30 | USD | Initial Jobless Claims | – | 205K | 205K |
| Friday – 31st December 2021 | |||||
| 09:00 | CNY | Manufacturing PMI (Dec) | – | 49.6 | 50.1 |