31 May 2021 Weekly Analysis
GCMAsia Weekly Report: May 31 – June 7
Market Review (Forex): May 24 – 28
US Dollar
The dollar index which traded against a basket of six major currency pairs hovered near two-year lows on last week amid over the backdrop of bearish economic data last week, which dialed down the market optimism toward the economic progression in United States. Besides, the US Dollar extend its losses as market participants fears upon the earlier ultra-easing monetary policy from the Federal Reserve would trigger inflation risk in future, which diminishing the appeal of the US Dollar. The Dollar Index was closing its price on last Friday session at the price of 89.90.
On the economic data front, most of the crucial economic data from US region had came in at bleak reading. According to Conference Board, U.S. CB Consumer Confidence notched down significantly from the previous reading of 117.5 to 117.2, missing the market forecast at 119.2. In addition, U.S. Gross Domestic Product (GDP) and U.S. Pending Home Sales came in at 6.4% and -4.4%, which fared worse than market expectation at 6.5% and 0.8% respectively. Nonetheless, the losses experienced by the US Dollar was limited amid positive employment data from U.S. region. According to Department of Labor, U.S. Initial Jobless Claims notched down from the preliminary reading of 444K to 406K, better than the market forecast at 425K.
Though, as for now market participants would remain their focus on the U.S. inflation rate in future. A jump in prices could be prompting the Federal Reserve to be tightening monetary policy to combat the inflation risk in future. Since the U.S. economy had continued to make rapid progress toward Fed’s goals, market participants had to start pricing a slightly more hawkish statement from Federal Reserve going forward while anticipating higher U.S. interest rates. Many economists also highlighted the important for the committee to clearly communicating its assessment of progress toward its long-run inflation goal. Nonetheless, the overall statement from Fed remained vague recently, hence investors would continue to scrutinize the latest updates with regards of further economic data and policy statement from Fed in order to gauge the likelihood movement for the currency.
USD/JPY
The pair of USD/JPY receive bullish momentum on last week while ending last Friday session at the price of 109.85. The overall bullish momentum for the pair was mainly due to the depreciation of the Japanese Yen. The Japanese Yen slumped significantly last week amid the concerns over the resurgence of Covid-19 cases from Japan region had significantly diminished the appeal of Japanese Yen. On top of that, investors remained pessimistic toward the economic progress in Japan over the backdrop of bearish employment data, falling consumer prices and the government’s emergency restriction in Tokyo and other areas due to the Covid-19 pandemic. According to Reuters, hospitals in Japan’s second largest city of Osaka are buckling under a huge wave of new Covid-19 infections, running out of beds and ventilators as exhausted doctors warn of a “system collapse”. The highly infections of British and India variant have led to this explosive growth in the number of patients
EUR/USD
The pair of EUR/USD was traded within a range while hovered in high level at 1.2220 last week. The overall bullish momentum for the pair of EUR/USD was mainly due to depreciation of US Dollar. Besides that, the Euro received further bullish momentum over the backdrop of the upbeat economic data from the European region and also prospect positive toward the vaccination progress in the European region, which increasing the appeal for the Euro. According to ifo Institute for Economic Research, Germany ifo Business Climate Index had increased significantly from the previous reading of 96.6 to 99.2, confounding the market forecast for a reading up to 98.2. On the vaccination front, the European Union expects to have received more than a billion doses of Covid-19 vaccines by the end of September, according to Reuters. Indeed, the document shows the EU is confident of having enough vaccines to immunize its entire eligible population by September, well beyond the initial goal of inoculating 70% of the adult population by end the of summer
GBP/USD
The pair of GBP/USD was surged on last week while closing its market price at 1.4195. The overall trend for the pair of GBP/USD remained bullish on last week over the backdrop of hawkish statement from Bank of England last week, which spurring significant demand for the Pound Sterling. According to Reuters, The Bank of England claimed that they could increase the interest rates as soon as the first half of next year following the job market bounces back faster than expected, but it is more likely to wait until later in 2022, BoE policymaker Gertjan Vlieghe said on Thursda. Besides, The BoE speculated the consumer price inflation will exceed 2.5% by the end of the year due to range of one-off effects related to the pandemic.
Market Review (Commodities): May 24 – 28
GOLD
Gold price surged tremendously throughout last week with the price of $1904.00 per troy ounce amid the hopes upon the massive economic stimulus plan from the United States and also expansionary monetary policy from Fed had spurred higher probability of inflation risk in future, which insinuating the market demand for the safe-haven commodity. Higher inflation would normally tend to reduce the value of currency. Hence, when inflation remains high over a longer period, gold had become an effective tool in order to hedge against the inflationary condition. Nonetheless, investors would continue to scrutinize the latest updates with regards of monetary policy statement from global central bank in order to gauge the likelihood movement for the safe-haven commodity.
CrudeOIL
The price of crude oil surged significantly last week while closing last Friday session with the price of $66.85 per barrel amid positive inventory data from U.S. region last week. According to Energy Information Administration (EIA), the U.S Crude Oil inventories declined significantly from the previous reading of -0.426M to -1.662M, better than the market forecast at -1.050M. Nonetheless, the gains experienced by the crude oil commodity was limited following the Covid-19 cases in Asian countries surged up significantly, which dragged down the appeal for this black-commodity. Investors would continue to scrutinize the latest updates with regards of Covid-19 vaccination program in order to receive trading signal.
Weekly Outlook: May 31 – June 7
For the week ahead, investors would continue to focus on crucial economic data such as Non Farm Payroll and also Covid-19 development 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: May 31 – June 7
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 31st May 2021 | |||||
| N/A | |||||
| Tuesday – 1st June 2021 | |||||
| 09:45 | CNY | Caixin Manufacturing PMI (May) | – | 51.7 | 51.1 |
| 12:30 | AUD | RBA Interest Rate Decision (Jun) | – | 0.10% | 0.10% |
| 12:30 | AUD | RBA Rate Statement | – | – | – |
| 15:55 | EUR | German Manufacturing PMI (May) | – | 64.0 | 64.0 |
| 15:55 | EUR | German Unemployment Change (May) | – | -9K | 9K |
| 16:30 | GBP | Manufacturing PMI (May) | – | 66.1 | 66.1 |
| 17:00 | EUR | CPI (YoY) (May) | – | 1.9% | 1.6% |
| 20:30 | CAD | GDP (MoM) (Mar) | – | 1.0% | 0.4% |
| 22:00 | USD | ISM Manufacturing PMI (May) | – | 60.7 | 60.7 |
| 23:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| Wednesday – 2nd June 2021 | |||||
| 09:30 | AUD | GDP (QoQ) (Q1) | – | 2.5% | 3.1% |
| Thursday – 3rd June 2021 | |||||
| 09:30 | AUD | Retail Sales (MoM) (Apr) | – | – | 1.1% |
| 16:30 | GBP | Services PMI (May) | – | 61.8 | 61.8 |
| 20:15 | USD | ADP Nonfarm Employment Change (May) | – | 650K | 742K |
| 20:30 | USD | Initial Jobless Claims | – | 395K | 406K |
| 22:00 | USD | ISM Non-Manufacturing PMI (May) | – | 63.0 | 62.7 |
| 23:00 | CrudeOIL | Crude Oil Inventories | – | – | -1.662M |
| Friday – 4th June 2021 | |||||
| 00:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 15:00 | NZD | RBNZ Gov Orr Speaks | – | – | – |
| 16:30 | GBP | Construction PMI (May) | – | 62.0 | 61.6 |
| 19:00 | USD | Fed Chair Powell Speaks | – | – | – |
| 19:00 | EUR | ECB President Lagarde Speaks | – | – | – |
| 20:30 | USD | Nonfarm Payrolls (May) | – | 650K | 266K |
| 20:30 | USD | Unemployment Rate (May) | – | 5.9% | 6.1% |
| 20:30 | CAD | Employment Change (May) | – | -22.5K | -207.1K |
| 22:00 | CAD | Ivey PMI (May) | – | – | 60.6 |