31 July 2023 Weekly Analysis
GCMAsia Weekly Report: July 31 – August 4
Market Review (Forex): July 24 – 29
US Dollar
The U.S. dollar index, which was traded against a basket of six major currencies, rebounded after hitting its 15-month low while closing the market at the price of 101.40 amid the risk of recession in Europe zone heightened and a series of upbeat economic data were released.
Last week, investors focused their attention on US economic data and Federal Open Market Committee (FOMC) Press Conference. On Tuesday, the CB Consumer Confidence (Jul) has increased from 110.1 to 117.0, higher than the market forecast of 111.8. This represented consumer were confident to the market and willing to spend more, which could lead the inflation increased. On Thursday, dollar index spiked up after Fed’s Press Conference and great economic data was released. The Fed increased the interest rate from 5.25% to 5.50%, as investors expected. For the upcoming interest rate decision, Jerome Powell said that their decision will be data-dependent, where it represents that Fed attitude toward interest rate will be “Hawkish hold”, it could be a hike or hold of interest decision in September FOMC meeting. After that, the Fed said they no longer expect a recession in US this year.
On the economic data front, the US second quarter GDP also increased from 2.0% to 2.4%, higher than the market forecast of 1.8%. For the US Core durable goods orders remained at 0.6%, but still higher than the market forecast of 0.0%. These data represented US economic conditions was more active than expected and the manufacturing sector were expanding. Apart from that, the initial jobless claims has decreased from 228k to 221k, below the market forecast of 235k. This has been the 2nd consecutive weeks that the initial jobless claim were lower than forecast, showing that the labor market remained resilient.
USD/JPY
The pair of USD/JPY extended its losses last week while closing its market price at 140.70. Last Friday, the Tokyo Jul CPI rose 3.2% y/y, unchanged from Jun but still stronger than expectations of 2.9% y/y. Tokyo Core CPI rose 4.0% y/y, stronger than expectations of 3.7% y/y, refreshing the record of greatest growth in almost 40 years. BoJ remained the interest rate decision at -0.1% as market forecasted. Besides that, the yen retreated due to dovish comments from BoJ Governor Ueda and the adjustment of its yield curve control from 0.5% to 1.0%. BoJ offered to buy 10-year debt at 1.0% each day, doubling of the upper target of the yield range.
EUR/USD
The pair of EUR/USD extended its losses last week while closing its market price at 1.1015. The euro slumped as German, French and Euro zone released weaker-than-expected PMI data. These 3 PMI data were below market forecast and decreased from previous month, which represented the manufacturing activities were tightening. Besides that, the European Central Bank (ECB) has increased 25 bps of interest rate from 4.0% to 4.25%, matched with market forecast. The ECB President Lagarde has said that the ECB’s officials will carry a more open minded attitude toward it in the upcoming ECB interest rate decision. Hence, it represents that ECB will either hike or hold its interest rate in the meeting. On Friday, German and French has released second quarter GDP, caused EUR/USD rebounded. For German GDP, it has increased from -0.3% to -0.2%, but still below the market forecast of 0.1%, while the French GDP has increased from 0.1% to 0.5%, higher than market forecast 0.1%.
GBP/USD
The pair of GBP/USD was traded flat last week while closing its market price at 1.2840. Last Monday, UK released its S&P Global/CIPS UK Manufacturing PMI has decreased from 46.5 to 45.0, below the market forecast of 46.1. Last Thursday, US released its second quarter report has increased from 2.0% to 2.4%, higher than the market forecast of 1.8%. This outstanding performance made the currencies pair experience a deep sank when investor compare UK economic conditions with US economic conditions. For the labor market, the initial jobless claims has decreased from 228k to 221k, below the market forecast of 235k, mirroring that the. The US labor market remained resilient. On the next day, the currencies pair started to rebound due to the US Core PCE price index has decreased from 4.6% to 4.1%, below market forecast of 4.2%.
Market Review (Commodities): July 24 – 29
GOLD
The gold price dropped while closing its market price at 1957.50. As US shocked investors by its outperformed economic data, dollar index spiked last week. On Thursday, the gold prices has dropped around $21 due to the US outstanding economic data. The US second quarter GDP has increased from 2.0% to 2.4%, higher than the market forecast of 1.8%. For the US Core durable goods orders has remained 0.6%, but higher than the market forecast of 0.0%, which represented the US economy were expanding surprisingly. For the labor market, the initial jobless claims has decreased from 228k to 221k, below the market forecast of 235k, mirroring that the US labor market remained resilient. On Friday, Gold price has rose around $11 due to the Core PCE price index has decreased from 4.6% to 4.1%, below market forecast of 4.2%. The strengthening of US dollar has caused the drop in gold price.
CrudeOIL
The crude oil price traded higher while closing its market price at 80.30. Since April OPEC+ member included Saudi Arabia and Russia agreed to cut oil production by 500,000 barrels per day in August led crude oil price spiked as supply decreased. While Crude Oil production has decreased, but China has imported a record high of crude oil in June, where China boosted its stockpiling of crude oil to the highest level in three years. The world’s biggest importer added 2.1 million barrels per day (bpd) in June from 1.77 bpd in May. Besides that, growing economic optimism also one of the factor caused crude oil price spiked as investors believe China will come out few economic stimulus package in the coming weeks. Not only China economic stimulus package, the US economy also grew stronger, which has shown by the second quarter GDP, spurring the optimism in oil market.
Weekly Outlook: July 31 – August 4
During this week, investors will pay attention to key financial events and data such as the US non-farm payroll, unemployment rate, Bank of England interest rate decision, and the Reserve Bank of Australia interest rate decision to judge the trend and direction of the currencies of various countries.
As for oil traders, they will be eyeing on US inventories level reported by EIA and API to gauge the strength of crude demand for world’s largest oil consumer.
Highlighted economy data and events for the week: July 31 – August 4
| Time | Market | Event | Actual | Forecast | Previous |
| Mondah – 31th July 2023 | |||||
| 09:30 | CNY | Chinese Composite PMI (Jul) | – | – | 52.5 |
| 09:30 | CNY | Manufacturing PMI (Jul) | – | 49.2 | 49.0 |
| 09:30 | CNY | Non-Manufacturing PMI (Jul) | – | – | 53.2 |
| 17:00 | EUR | CPI (YoY) (Jul) | – | 5.3% | 5.5% |
| Tuesday – 1th August 2023 | |||||
| 09:45 | CNY | Caixin Manufacturing PMI (Jul) | – | 50.3 | 50.5 |
| 12:30 | AUD | RBA Interest Rate Decision (Aug) | – | 4.35% | 4.10% |
| 15:55 | EUR | HCOB Germany Manufacturing PMI (Jul) | – | 38.8 | 40.6 |
| 16:30 | GBP | S&P Global/CIPS UK Manufacturing PMI (Jul) | – | 45.0 | 46.5 |
| 16:30 | CrudeOIL | API Weekly Crude Oil Stock | – | – | 1.319M |
| 17:00 | EUR | Unemployment Rate (Jun) | – | 6.5% | 6.5% |
| 22:00 | USD | ISM Manufacturing PMI (Jul) | – | 46.5 | 46.0 |
| 22:00 | USD | JOLTs Job Openings (Jun) | – | 9.620M | 9.824M |
| Wednesday – 2th August 2023 | |||||
| 20:15 | USD | ADP Nonfarm Employment Change (Jul) | – | – | 497K |
| 22:30 | CrudeOIL | Crude Oil Inventories | – | -0.071M | -0.600M |
| Thursday – 3th August 2023 | |||||
| 19:00 | GBP | BoE Interest Rate Decision (Aug) | – | 5.25% | 5.00% |
| 19:00 | GBP | BoE MPC Meeting Minutes | – | – | – |
| 19:30 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 20:30 | USD | Initial Jobless Claims | – | 227K | 221K |
| 21:45 | USD | S&P Global Composite PMI (Jul) | – | 52.0 | 53.2 |
| 21:45 | USD | S&P Global US Services PMI (Jul) | – | 52.4 | 54.4 |
| 22:00 | USD | ISM Non-Manufacturing PMI (Jul) | – | 52.1 | 53.9 |
| Friday – 4th August 2023 | |||||
| 09:30 | AUD | RBA Monetary Policy Statement | – | – | – |
| 20:30 | USD | Average Hourly Earnings (MoM) (Jul) | – | 0.3% | 0.4% |
| 20:30 | USD | Nonfarm Payrolls (Jul) | – | 184K | 209K |
| 20:30 | USD | Unemployment Rate (Jul) | – | 3.6% | 3.6% |
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