29 May 2023 Weekly Analysis
GCMAsia Weekly Report: May 29 – June 2
Market Review (Forex): May 22 – 26
US Dollar
The Dollar Index which traded against a basket of six major currencies managed to regain its luster over the past one week amid hawkish statements from the Fed members while there was ‘constructive’ progress in the debt ceiling talks between Democrats and Republicans to avert the possibility default. The dollar index ended the trading session at the price of 104.10.
Earlier in the week, the Federal Reserve Bank of St. Louis President James Bullard said that the US may need to raise interest rate by another 50-basis point in this year in order to successfully tame the inflation. The base case of hiking interest rate further was due to the rate of price increases has not come down ‘fast enough’, even the cash rate has been rising unstoppably since more than a year ago. Besides, Federal Reserve Board Governor Christopher Waller said that he is concerned about the lack of progress on inflation. Hence, the official cash rate may not rise at next month’s Fed meeting, but an end to the rate-raising plan is unlikely at this moment. He also highlighted that the Fed need more evidence to show that the US inflation is moving toward their long-term target, which is 2%.
Besides, a series of positive economic data also boosted the shininess of the dollar index throughout the week. The number of Americans filing new claims for unemployment benefits rose slightly after the prior week’s data revised to a low, suggesting persistent labor market strength. The initial jobless claims increased to 229K from 225k after the previous data was revised, but the recent figures were lower than the market consensus at 250k, giving the dollar a boost. Economists expect layoffs to increase as the high-interest rate spread through the economy and tightening financial conditions make it harder for small businesses to extend credit. However, the labor data came in better than forecast, in line with recent Service PMI data that suggests the economy is expanding in the second quarter. In a separate report, the Commerce’s Bureau of Economic Analysis unveil the US Gross Domestic Product (GDP) and confirmed the economy is cooling down. GDP rose 1.3% in the first quarter, compared with 2.6% in the previous quarter, but was higher than the consensus estimates of 1.1%, marking the third consecutive expansion of the economy.
Going forward, the deal of raising the debt ceiling is still the major event the investors are eyeing on after both parties have finally achieved a deal in principle. Besides, the announcement of the Nonfarm Payroll will also gather the market attention on the coming Friday.
USD/JPY
The pair of USD/JPY extended its gains last week while closing its market price at 140.60. The pairing was supported by the hawkish statement from the Federal Reserve members, a series of positive economic data as well as the optimism of the debt ceiling talk. With such a backdrop, the safe haven currency Japanese Yen plunged significantly and hit its lowest level in half year.
EUR/USD
The pair of EUR/USD managed to end the trading session with a lower level at 1.0725. Similarly, the single currency of Euro plunged due to the strengths of dollar index. However, the euro were being sell-off tremendously last week as the ECB’s President Lagarde highlighted that the rates are to stay restrictive for as long as necessary. Besides, the strongest economy in the EU is now has entered the stage of recession. According to the Federal Statistical Office of Germany, the German GDP posted a reading at -0.3%, lower than the consensus forecast of -0.1%, mirroring that the German economy has been in the negative territory of growth for the 2nd consecutive quarter. Comparing Germany with other highly developed countries, the German economy was losing its potential for growth which prompted investors to move away their investments from the country.
GBP/USD
The pair of GBP/USD posted huge losses last week while ending last week’s session at the price of 1.2345. Similarly, the losses of the pairing were found from the strength of the dollar index. However, the losses of the currency were limited following the announcement of the still-high inflation figure. Data published on Wednesday showed the consumer price index rose by 8.7% in annual terms last month, higher than the consensus forecast at 8.3%. But, it is noteworthy to highlight that BOE Bailey has mentioned that the projections showed government will meet inflation target this year.
Market Review (Commodities): May 22 – 26
GOLD
The gold price plummeted throughout the week while closing its market price at $1946.45 per troy ounce as the significant progress in the debt ceiling talk diminished the appeal of the safe haven asset. Before that, the Federal Reserve Bank of St. Louis President James Bullard and the Board Governor Christopher Waller hawkish stances slashed the “bull” in the market, pressured the gold prices below the level of $1980 per troy ounce. Then, a series of upbeat economic data and the progress in the debt ceiling talk triggered another huge wave of selling pressures in the gold market. Going forward, the short-term prospect of the gold market remains cloudy as the deal of increasing the debt limit has been reached in principle.
CrudeOIL
Crude oil prices surged throughout the week and ended last week at $72.85 per barrel. Last week, the unexpected oil inventories drew surprised the market participants, which prompted them to rush into the oil market. According to the Energy Information Administration (EIA), the US oil inventories level had shed 12.5 million barrels in the week to May 19. However, the gains of the oil product wiped off by the negative comment from the Deputy Prime Minister of Russia Alexander Novak. Last Thursday, he revealed that there should be no any new steps from the OPEC+ group of oil producers to cut their oil production further at its meeting in Vienna on June 4. Despite, the OPEC+ meeting is still in the spotlight of the market participants next week.
Weekly Outlook: May 29 – June 2
For the week ahead, investors would continue to focus on crucial event such as Nonfarm Payroll this week in order to determine further direction. Besides that, the ongoing banking turmoil in the US 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: May 29 – June 2
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 29th May 2023 | |||||
| N/A | |||||
| Tuesday –30th May 2023 | |||||
| 22:00 | USD | CB Consumer Confidence (May) | – | 99.0 | 101.3 |
| Wednesday – 31st May 2023 | |||||
| 09:30 | CNY | Manufacturing PMI (May) | – | 51.4 | 49.2 |
| 15:55 | EUR | German Unemployment Change (May) | – | – | 24K |
| 20:00 | EUR | German CPI (MoM) (May) | – | 0.6% | 0.4% |
| 20:30 | CAD | GDP (MoM) (Mar) | – | 0.2% | 0.1% |
| 20:30 | EUR | ECB President Lagarde Speaks | – | – | – |
| 22:00 | USD | JOLTs Job Openings (Apr) | – | 9.775M | 9.590M |
| Thursday –1st June 2023 | |||||
| 00:30 | USD | FOMC Member Harker Speaks | – | – | – |
| 04:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | – |
| 09:30 | AUD | Retail Sales (MoM) | – | 0.0% | 0.4% |
| 09:45 | CNY | Caixin Manufacturing PMI (May) | – | 50.3 | 49.5 |
| 15:55 | EUR | German Manufacturing PMI (May) | – | 42.9 | 42.9 |
| 16:30 | GBP | Manufacturing PMI (May) | – | 46.9 | 46.9 |
| 17:00 | EUR | CPI (YoY) (May) | – | 7.0% | 7.0% |
| 17:30 | EUR | ECB President Lagarde Speaks | – | – | – |
| 19:30 | EUR | ECB Publishes Account of Monetary Policy Meeting | – | – | – |
| 20:30 | USD | ADP Nonfarm Employment Change (May) | – | 170K | 296K |
| 20:30 | USD | Initial Jobless Claims | – | 235K | 229K |
| 22:00 | USD | ISM Manufacturing PMI (May) | – | 47.0 | 47.1 |
| 23:00 | CrudeOIL | Crude Oil Inventories | – | – | -12.456M |
| Friday –2nd June 2023 | |||||
| 20:30 | USD | Average Hourly Earnings (MoM) (May) | – | 0.4% | 0.5% |
| 20:30 | USD | Nonfarm Payrolls (May) | – | 180K | 253K |
| 20:30 | USD | Unemployment Rate (May) | – | 3.5% | 3.4% |
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