23 December 2019 Weekly Analysis
GCMAsia Weekly Report: December 23 – 28
Market Review (Forex): December 16 – 21
US Dollar
The dollar index which measure its value against a basket of six major currency surged in last week following a string of positive U.S. data which pointed to solid economic growth in U.S. while closing its market at the price of 97.23. Greenback received a significant demand against its rivals in the last week was mostly due to easing of trade tension and a series of upbeat economic data which released from the U.S. region on last week.
The dollar index received some bullish momentum through the week following the series of positive data were released. According to Census Bureau, U.S. Building Permits for last month came in at 1.482M, exceeding the economist forecast at 1.410M. In addition, U.S. JOLTs Job Opening for the month of November notched up from the previous reading of 7.018M to 7.267M, higher than the market forecast at 7.032M. Indeed, according to Bureau of Economic Analysis, U.S. Gross Domestic Product (GDP) for last quarter came in at 2.1%, in line with economists’ expectation. These upbeats data indicated the strength of the economy growth in the U.S. region, which further strengthen the belief that the Federal Reserve will pause on interest rate cuts for the near future and insinuating demand for the greenback. However, the gains experienced by the dollar index was limited following a bleak data in the manufacturing and housing sector from the U.S. region were published on last week. According to Federal Reserve bank of Philadelphia, U.S. Philadelphia Fed Manufacturing Index notched down from the previous reading of 10.4 to 0.3, missing the economist forecast of 8.0 while U.S. Existing Home Sales came in at 5.35M, lower than the market forecast at 5.44M. These both data were fared worse than expectation, spurring some sell-off for the dollar index.
With regards to trade war, Greenback received some bullish momentum amid to positive prospect for the resolution of trade deal. According to Reuters, on last Friday, U.S. President Donald Trump claimed that he had a “very good talk” with the Chinese President Xi Jinping about the phase one trade deal and added that China has started to make large purchases of U.S. agricultural product. In addition, China’s Minister of Finance said China would lower or remove the import tariffs on 850 products from 1st January 2020 from the U.S., spurring a further positive hope upon the resolution of trade war in future. At this time, market participants remain fixated upon ongoing headlines of trade war as the trade problem have not yet been resolved completely.
USD/JPY
Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 109.46. Likewise, Japanese Yen received some bearish momentum during the early last week amid to positive U.S. economic data and positive trade prospect for US and China has reduced the risk appetite, which spurring some sell-off for the safe-haven assets such as Japanese Yen. However, the losses experienced by the Japanese Yen was limited on last Thursday following the Bank of Japan kept its interest rate unchanged at -0.10% during their interest rate meeting, while providing hawkish outlook with regards of economic growth in Japan and enhancing the price for the Japanese Yen. According to Bank of Japan, they claimed that the assessment of the economy and the outlook in Japan remains strong and it is expected to continue on a moderately expanding trend in future, spurring some market confidence toward the economic progression in Japan.
EUR/USD
Pair of EUR/USD slumped last week while closing last Friday’s trading session with the price of 1.1074. The overall bearish momentum for the pair was largely due to a series bleak data from the Europe region and the strongness in the rival currencies, especially in U.S dollar. According to Markit Economics, Eurozone Markit Composite Purchasing Managers Index (PMI) came in at 50.6, missing the economist forecast at 50.7. Meanwhile, Germany Manufacturing Purchasing Managers Index (PMI) notched down to 43.4 from the previous reading of 44.1, missing the economist forecast at 44.5. In addition, euro received a further bearish momentum following British Prime Minister Boris Johnson put a no-deal Brexit from the European Union back on the table. Britain on last Tuesday set a hard deadline of December 2020 to reach a new trade deal with the EU, spurring fears of hard-Brexit. If a hard Brexit occur between UK and EU, it would eventually harm the both countries economy in term of future trade condition.
GBP/USD
Pair of GBP/USD plunged throughout the entire last week amid poor economic data from the UK region and the fears of hard-Brexit, while closing its Friday market at 1.3048. Last week, Pound sterling received a huge sell-off following a number of bleak data from the UK region were released. According to Markit Economics, U.K Composite Purchasing Managers’ Index (PMI) notched down from the previous reading of 49.3 to 48.5, missing the economist forecast at 49.6. Meanwhile, U.K. Claimant Count change notched up from 26.4K to 28.8K, exceeding the economist forecast at 21.2K, which indicating weakness of labor market in the UK region. Indeed, according to Office for National Statistics, U.K. Average Earning Index + Bonus for last month reduced from 3.7% to 3.2%, missing the economist forecast at 3.4%. U.K. retail sales for last month came in at -0.6%, weaker than the market forecast at 0.3%. The overall data from the UK region were mostly fared worse than expectation, dialing down market optimism towards economic progression in the United Kingdom and spurring some sell-off for the Pound Sterling. In addition, the Pound Sterling slumped more than 0.5% on last Tuesday following a media report that British Prime Minister Boris Johnson will write into law that the arrangements for the United Kingdom to leave the European Union must end by 31st December 2020, rising the concern that Britain could crash out of the European Union without a trade deal in place at the end of a transition period in 31st December 2020. The renewed hard-Brexit fears which spurring a geopolitical uncertainty in the UK, which causing a significant sell-off for the Pound Sterling.
Market Review (Commodities): December 16 – 21
GOLD
Gold price was traded within a range for the entire last week amid to mixed market sentiment, while closing its Friday market at $1477.83 per troy ounce. Earlier last week, gold suffering some sell-off from market after the positive data been released in US region, such as U.S. JOLTS job opening and the U.S. Gross Domestic Product. Indeed, gold price received further bearish momentum amid to positive prospect for the resolution of trade war. However, gold received some bullish momentum amid to geopolitical uncertainty in the region of U.K with regards of the Brexit issue. On the other hand, gold price received some demand from the market participants in the year end as they were engaging in tax-loss harvesting to offset realized capital gains, prompting a sell-off of stock in the equity market while shifting their portfolio towards the safe-haven metal such as gold.
CrudeOIL
Oil price was traded higher while closing last week market session with $60.35 per barrel. The oil price was lifted up by the market participants throughout the entire last week due to the trade optimism between the United State and China. The oil price edged higher as market participants expected the resolution of trade war may improve the global economic growth, which would be spurring a significant demand for the commodity in the future.
According to latest news, the United States and China are close to signing a trade deal, with President Donald Trump saying an agreement would be signed “very shortly” on last Friday. The United States is to agree to reduce some tariffs from China in return for a big increase in purchases by Chinese importers of American farm products. The easing of tensions would improve the business confidence and boosted the outlook for economic growth, which spurring future demand for the commodity.
In addition, the oil market was remained scented as crude oil data from EIA showed a decline in inventories level. According to Energy Information Administration (EIA), the U.S. crude oil inventories showed a huge decline in US inventories level where the data notched down from the previous reading of 0.822M to the reading of -1.085M, while showing demand of crude oil still remained strong despite the trade deadlock. Besides, recent extension of oil cut production by OPEC and its allies also supporting the oil price to increase. As of now, investors will continue to eye on more inventories data as well as trade development between U.S. and China in order to gauge the further direction for the oil market.
Weekly Outlook: December 23 – 28
For the week ahead, investors will pay attention upon key event such as U.S. initial jobless claimed and the Japan Monetary Policy meeting minutes which will be announced within this week to obtain a further trading signal.
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: December 23 – 28
| Monday, December 23 |
Data USD – Core Durable Goods Order (MoM) (Nov) CAD – GBP (MoM) (Oct) USD – New Home Sales (Nov) Events N/A
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| Tuesday, December 24 |
Data N/A Events JPY – Monetary Policy Meeting Minutes |
| Wednesday, December 25 |
Data CrudeOIL – API Weekly Crude Oil Stock
Events N/A
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Thursday, December 26 |
Data USD – Initial Jobless Claims Events N/A |
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Friday, December 27
|
Data JPY– Tokyo Core CPI (YoY) (Dec) JPY – Industrial Production (MoM) (Nov) CrudeOIL – Crude Oil Inventories
Events N/A |
| Saturday, December 28
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Data
CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events N/A
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