28 January 2019 Weekly Analysis
GCMAsia Weekly Report: January 28 – February 1
Market Review (Forex): January 21 – January 25
US Dollar
US dollar reversed from prior recovery phase to bearish momentum while closing last week’s trade at 95.35 against a basket of six major currencies.
During early of the week, Greenback climbed higher amid Sino-US trade talk optimism which has exerted bullish momentum towards the dollar market. According to the report from China officials, China decided to offer United States a ‘help’ to balance its current account surplus issues by increasing the import of US good sum up to $ 1 trillion. The news has spurred up the dollar market sentiment as market participants felt that the trade war will be solved sooner than expected. However, poorer than expected reading’s data such as US existing Home Sales data has deteriorated the dollar market sentiment. According to the National Association of Realtors, existing home sales data came in at 4.99M, comparing to 5.25M, such downbeat data hinted that U.S economy is slowing down and interest rate hike will be unlikely to happen.
Likewise, Dollar index fell sharply last Friday amid increasing tension between U.S and China where the scheduled trade meeting with Beijing has been canceled due to intellectual property issue. It portrayed that there is still a long mile away from successfully resolved the trade dispute between US and China.
Besides, persistency of US President Donald Trump toward the border wall funding resulted the US government to continue shutdown and extended to 34th days. Other than that, a report by Wall Street Journal further aggravated the tarnishing image of Dollar index market as they emphasized that Fed may leave it balance sheet program and policy interest rate unchanged in the coming week. It triggered tremendous bearish momentum on Greenback and investors reacted to it by shifted their investment portfolio to other currencies and safe haven asset such as Euro and Gold.
USD/JPY
USD/JPY was remained cloudy throughout the entire week while closing the market at 109.50 during late Friday trading session. Japanese Yen which act as safe haven asset faced a high demand from market participants last week due to slow down in global growth and political uncertainties surrounding the market. Moreover, report that released from Wall Street Journal has spurred up the temptation of safe haven asset and resulting the pair of USD/JPY to depreciate significantly.
EUR/USD
Euro dipped to 1.1300 early last week while closing the market at 1.1405 amid European zone released downbeat data which included Germany Manufacturing PMI. According to Markit Economics, the data came in at a rate of 49.9, lower than economists forecast of 51.4. An actual reading of below 50 indicates that Germany manufacturing sector is undergoing contraction phrase and investors are threatened by such poor data, causing them to sell off Euro massively and shifted their investment to other market. Prior to interest rate decision, Euro extended its losses after European zone announced PMI data which is weaker than expected reading. Below expectation of data that announced throughout the week were indicating that European Zone is still surrounding by economic growth slowing down issue. Last Thursday, European Central Bank has maintained their stance by cementing the interest rate at 0.00%. Due to uncertainties in European Zone, ECB may remain their interest rate at low level for a certain period until the issues can be ticked out.
GBP/USD
Pound Sterling succeed to extend its gain to a higher level while closing the market at 1.3195 last Friday. After Theresa May faced a huge defeat on her Brexit deal, UK Labor Party leader Jeremy Corbyn who pressured by its party member and MPs eventually proposed a plans of second Brexit referendum to Theresa May. It will be voted by parliament in this coming week while a majority backing upon the referendum would lead to another new public vote and eventually Brexit reversal will likely to be happened. As of now, investors are eyeing on the parliamentary vote on second referendum which will be held later this week.
Market Review (Commodities): January 21 – January 25
GOLD
Gold price skyrocketed to $1302.45 a troy ounce last Friday, its highest level in six months. Safe-haven assets such as Japanese yen and gold received tremendous buy in following a shift in sentiment and demand for less risker assets in the market. The shift was evoked following numerous reports which suggests the trade dispute between United States and China is remain unsolved while the dovish note from Mario Draghi that given out on ECB Press Conference has spurred up the market safe haven preferences.
Crude Oil
Crude oil price reversed to bearish trend while ended trading at $53.50 a barrel last Friday. A fall in crude oil prices was triggered by global growth slowdown as it might lead to lesser demand upon the asset in the future. Besides, oil market remains somber and pressured by possible economic slowdown in China after its highly anticipated GDP data slumped to 6.6%, its weakest level in 28 years.
Besides, International Monetary Fund which trimmed its global growth forecasts has dragged the oil price further down as it signals that the global demand on crude oil may decrease and ongoing supply glut may remain unsolved. On the other hand, cancellation of a planned meeting between US and China in Beijing has wiped out investor’s confidences in oil as worsening of trade war will pull down the demand of crude oil. Moreover, downbeat data of weekly crude oil stocks has further exerted bearish momentum in crude oil market. According to reports from American Petroleum Institute, weekly crude oil stocks rose to 6.550M, comparing to previous reading of -0.560M, thus dragging the oil sentiment down.
On the other hand, Venezuelan crisis has exerted bullish momentum on crude oil market and crude oil price spiked up last Friday. Following leadership crisis in Venezuela, Trump administration is reportedly considering a sanction against Venezuelan oil after President Nicolas Maduro broke up the political relations with US. The punishment against Venezuelan government may reduce the surplus of global oil inventories issues. Last but not least, a subsequent increase in the number of U.S. Baker Hughes Oil Rig Count indicating that the oil drilling activity is even more active now, which may deteriorate the oil supply glut.
Weekly Outlook: January 28 – February 1
For the week ahead, investor’s will place their focus upon several risk events and major data such as Brexit developments in the UK, Fed interest rate decision and NFP data to gauge market sentiment and outlook.
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 28 – February 1
| Monday, January 28 |
Data N/A
Events EUR – ECB President Draghi Speaks GBP – BoE Gov Carney Speaks
|
| Tuesday, January 29 | Data
USD – Goods Trade Balance (Nov) USD – CB Consumer Confidence (Jan)
Events N/A
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| Wednesday, January 30 |
Data CrudeOIL – API Weekly Crude Oil Stock AUD – CPI (QoQ) (Q4) EUR – German CPI (MoM) (Jan) USD – ADP Nonfarm Employment Change (Jan) USD – GDP (QoQ) (Q4) USD – Pending Home Sales (MoM) (Dec) CrudeOIL – EIA Crude Oil Inventories
Events GBP – UK Parliament vote on Brexit deal
|
| Thursday, January 31 |
Data USD – Fed Interest Rate Decision JPY – Industrial Production (MoM) (Dec) CNY – Manufacturing PMI (Jan) EUR – German Unemployment Change (Jan) EUR – GDP (QoQ) EUR – Unemployment Rate (Dec) USD – Initial Jobless Claims CAD – GDP (MoM) (Nov)
Events USD – FOMC Statement USD – FOMC Press Conference
|
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Friday, February 1
|
Data AUD – PPI (QoQ) (Q4) CNY – Caixin Manufacturing PMI (Jan) EUR – German Manufacturing PMI (Jan) GBP – Manufacturing PMI (Jan) EUR – CPI (YoY) (Jan) USD – Nonfarm Payrolls (Jan) USD – Unemployment Rate (Jan) USD – ISM Manufacturing PMI (Jan) USD – ISM Manufacturing Employment (Jan) USD – Michigan Consumer Sentiment (Jan) USD – U.S. Baker Hughes Oil Rig Count
Events N/A
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