21 January 2019 Weekly Analysis
GCMAsia Weekly Report: January 21 – January 25
Market Review (Forex): January 14 – January 18
US Dollar
US dollar extended its recovery from prior low levels while closing last week’s trade at 95.95 against a basket of six major currencies.
Greenback received higher demand in the market following upbeat sentiment against US-China trade talks as well as some positive economic data from the region. According to media reports last week, both countries are considering concession ahead of Washington visit from Chinese Vice Premier Liu He at the end of the month which is aimed to resolve trade standoff between world’s two largest economy. It was reported that the Trump’s administration is considering on removing trade tariffs that were enacted upon China last year which may substantially reduce trade risks.
Likewise, the US dollar received further bullish support following the release of economic report from Philadelphia Fed. In the month of January, Philadelphia’s Fed Manufacturing Index rose sharply to 17.0, beating economists forecast for an increase to up to 9.7. In addition, initial jobless claims declined to 213,000, its lowest level in five weeks while indicating a continuous robustness in the US labor market. However, gains on the dollar remains limited following prior dovish signals from several Fed officials which calls for a halt in tightening monetary policy amid possible global economic slowdown.
USD/JPY
USD/JPY extended its gains sharply since early last week while closing the market at 109.73 during late Friday trading. Safe-haven yen received tremendous selloff following a change in market sentiment over possible trade truce between US and China. This has sparked higher demand for risky assets such as stocks, bonds and other foreign currencies which has sparked diminished holdings on safe-haven assets.
EUR/USD
Euro was steered by the bearish market throughout last week while closing the market at 1.1360. The single common currency experienced extended sessions of selloff following diminishing optimism towards the Eurozone in terms of economic outlook. Although recent economic releases from both Germany and EU stands within economist expectations, its downfall in attaining any significant positive change has left investor’s bewildered with the possibility for an interest rate hike from the European Central Bank by autumn this year. Thus, market participants will continue their focus upon EU economic releases in order to gauge the likelihood of a monetary policy tightening from the central bank.
GBP/USD
Pound sterling was traded with higher volatility while closing last week’s trading at 1.2874 against the US dollar. While sterling received large selloff during last Friday, overall trend on the pair of GBP/USD remains bullish due to higher optimism towards a possible resolution in Brexit conundrum. Market participants are currently betting on a second referendum vote on Britain’s EU membership which may bring to the possibility of canceling Brexit all together.
Market Review (Commodities): January 14 – January 18
GOLD
Gold price slid to its lowest level in more than a week on last Friday while closing at $1,281.27 a troy ounce. Safe-haven assets such as Japanese yen and gold received tremendous selloff following a shift in sentiment and demand for risky assets in the market. The shift was evoked following numerous reports which suggests a possible trade truce between US and China after Washington gauge the possibility of removing tariffs that were enacted upon Beijing last year. However, losses on the commodity were limited while market participants place their focus upon Brexit – the next high-risk event which may induce larger volatility in the market.
Crude Oil
Crude oil price extended its bullish trending while ended last week’s trading at $53.92 per barrel. Oil futures rallied more than 3% last Friday following reports which suggests US and China were considering concessions ahead of Washington visit from Chinese Vice Premier Liu He. Diminished market fears with regards to trade war has sparked up higher demand for the commodity as it is highly dependent on the global economic growth.
In addition, crude oil prices received further support following the release of highly optimistic Baker Hughes weekly report. According to Baker Hughes, the number of active oil drilling rigs fell by 21 to 852 for the week ended 11th January 2019. The data has notched in its third weekly decline in rig count and its largest weekly drop since February 2016. The downward trending suggests possible slowdown in domestic crude production which may help to reduce global supply glut temporarily as US daily production may not increase as fast as expected prior.
On the other hand, the release of monthly report from Organization of the Petroleum Exporting Countries has offered more optimism in the crude market. According to the report on last Friday, OPEC revealed that the group’s output has fell by 751,000 barrels to 31.6 million barrels per day in December. The decline was largely driven by a voluntary reduction in Saudi Arabia’s oil output as well as supply disruption in Libya and Syria.
Weekly Outlook: January 21 – January 25
For the week ahead, investor’s will place their focus upon several risk events in the Europe such as Brexit developments in the UK and European Central Bank interest rate decision to gauge market sentiment and outlook. Sidelined will be major data from the United States which is slated to be released towards the end of the week,
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: January 21 – 25
| Monday, January 21 |
Data CNY – GDP (QoQ) (Q4)
Events GBP – UK Prime Minister May Speaks
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| Tuesday, January 22 | Data
GBP – Average Earnings Index +Bonus (Nov) GBP – Claimant Count Change (Dec) EUR – German ZEW Economic Sentiment (Jan) USD – Existing Home Sales (Dec)
Events N/A
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| Wednesday, January 23 |
Data NZD – CPI (QoQ) (Q4) JPY – BoJ Interest Rate Decision GBP – CBI Industrial Trends Orders (Jan) CAD – Core Retail Sales (MoM) (Nov) USD – Crude Oil Inventories
Events JPY – BoJ Monetary Policy Statement JPY – BoJ Outlook Report JPY – BoJ Press Conference
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| Thursday, January 24 |
Data CrudeOIL – API Weekly Crude Oil Stock AUD – Employment Change (Dec) EUR – German Manufacturing PMI (Jan) EUR – ECB Interest Rate Decision USD – Initial Jobless Claims USD – Manufacturing PMI (Jan) USD – Markit Composite PMI (Jan) USD – Services PMI (Jan)
Events EUR – ECB Press Conference
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Friday, January 25
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Data CrudeOIL – Crude Oil Inventories EUR – German Ifo Business Climate Index USD – Core Durable Goods Orders (MoM) (Dec) USD – New Home Sales CrudeOIL – US Baker Hughes Oil Rig Count
Events N/A
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