1 February 2021 Weekly Analysis
GCMAsia Weekly Report: February 1 – 5
Market Review (Forex): January 25 – 29
US Dollar
The dollar index which traded against a basket of six major currency pairs have rose in overall but gave up some of its gains at the end of the week before ending the market at the price of 90.48. While coronavirus continue to weigh on the sentiment, positive data and statement from Jerome Powell last week have provide a boost for greenback demand.
On data front, most of the states were skewed to the positive. CB Consumer Confidence have improved to 89.3 against market expectation of 89.0. Core durable goods rose by a further 0.7%, higher than market estimate of 0.5%. Meanwhile, the U.S economy also saw further growth at the end of the year with GDP expands by 4% in the 4th quarter, in line with market forecast. Weekly jobless claims also came in at 847K, better than market expectation of 875K. Other key stats in the week also included trade, and housing sector data but these stats had a muted impact on the greenback.
At the same time, FOMC meeting became the major highlight event in the week. While Fed continue to maintain its rates as expected, FED Chair Powell looked to assure the markets that there would be no tapering of the asset purchasing program. Despite with the dovish note, investors remain bullish on the greenback following his decision to not end policy easing earlier than expected. When looking at data from the US, the economic recovery process is much better when compared to other countries such as the UK and EU. Thus, the market believes that the Fed’s decision will push the US economy to recover significantly by the end of this year when coupled with a faster vaccination process.
While the positive fundamentals continue to support the dollar, the greenback is expected to stay afloat for the time being while waiting for more catalyst to determine further direction. COVID-19 and U.S stimulus is expected to influence on the market while market continue to monitor the developments.
USD/JPY
The pair of USD/JPY have soared throughout the week while ending last week market session at the price of 104.69. Headlines such Gamestop and trading restriction, tension between U.S and as well as global economic fears have driving investors to safe-haven currencies. However, rising US yields that favor flows from the Yen to greenback as well as positive US data, hence causing the Yen to underperformed against the greenback as safe-haven currency. On data front, Tokyo Core CPI improved to -0.4% against market expectation of -0.6%. Japan Retail Sales also beating market expectation with the reading of -0.3% against -0.4% forecast. These data however have muted impact on the pair.
EUR/USD
Pair of EUR/USD was traded steady in overall last week but still recorded a loss at the price of 1.2136 before ending the market. On data front, German IFO Business Climate Index have slipped to 90.1 in January while German GDP also fell to 0.1%. German Unemployment Change came in higher at -41K against 6K forecast but the data have limited impact on the pair. Low vaccination rates and extend lockdown measures across EU countries continue to weigh heavily on the currency. AstraZeneca and Pfizer-BioNTech have both said production problems mean they cannot supply the expected numbers to the bloc.
GBP/USD
The pair of GBP/USD have traded in a tight range throughout last week, but ending the week with record of gain at the price of 1.3696. Overall data was skewed to the positive. Claimant Count Change came in at only 7.0K, better than market expectation of 35.0K while Unemployment Rate also improved to 5.0% against market forecast of 5.1%. UK infection rates continue to drop, with the latest figures showing infections at 29K, well below the recent peak of close to 70K new confirmed infections per day. Markets also wind down their bets on negative rates from BoE which provide further support for the currency.
Market Review (Commodities): January 25 – 29
GOLD
Gold price remain traded flat and still ending the week with a loss at the price of $1848.05 a troy ounce. Market continue to experience difficulties in determine its direction following headlines mixed headlines such as Gamestop frenzy, worsening coronavirus and Fed. However, the strength of the greenback on Friday exert pressure for the yellow metal as the price of the gold is negatively correlated with the greenback.
CrudeOIL
The price of crude oil remains stabilized throughout last week but still settled with a loss while closing the market at the price of $52.12 per barrels. Despite with news of supply cut from Saudi Arabia, surging coronavirus cases and demand concerns remains as the major influence towards the market.
On the earlier half of last week, crude oil market was supported by data that showed a drawdown in U.S. crude oil inventories. News of Saudi Arabia to cut output by 1 million barrels per day (bpd) in February and March. Despite that, the momentum was short-lived due to increasing fears towards demand outlook and surging coronavirus. Last week, global coronavirus cases have surpassed 100 million mark due to spike following a sharp increase in Europe and the US while new cases are beginning to reappear in Asia. In China, the world’s second-largest oil consumer, a surge in coronavirus cases has led to travel restrictions ahead of the Lunar New Year, normally the busiest travel season of the year. News of the South African virus variant has reached the US, raising concerns it could spread quickly and force authorities to reintroduce restrictions.
Following mixed bag of catalyst, the black commodity is expected to remain stabilized until market attains further signal to determine the direction for the commodity.
Weekly Outlook: February 1 – 5
For the week ahead, investors would continue to focus on the developments on U.S stimulus, coronavirus situation as well as economic data such ADP Non-Farm Employment Change and Non-Farm Payroll to determine further direction.
As for oil traders, they will be also 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: February 1 – 5
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 1st February 2021 | |||||
| 09:45 | CNY | Caixin Manufacturing PMI (Jan) | – | 52.7 | 53.0 |
| 16:55 | EUR | German Manufacturing PMI (Jan) | – | 57.0 | 58.3 |
| 17:30 | GBP | Manufacturing PMI (Jan) | – | 52.9 | 52.9 |
| 23:00 | USD | ISM Manufacturing PMI (Jan) | – | 60.0 | 60.5 |
| Tuesday – 2nd February 2021 | |||||
| 11:30 | AUD | RBA Interest Rate Decision (Jan) | – | 0.10% | 0.10% |
| 11:30 | AUD | RBA Rate Statement | – | – | – |
| Wednesday – 3th February 2021 | |||||
| 05:45 | NZD | Employment Change (QoQ) (Q4) | – | -0.8% | -0.8% |
| 16:00 | EUR | ECB Monetary Policy Statement | – | – | – |
| 17:30 | GBP | Services PMI (Jan) | – | 38.8 | 38.8 |
| 18:00 | EUR | CPI (YoY) (Jan) | – | 0.5% | -0.3% |
| 21:15 | USD | ADP Nonfarm Employment Change (Jan) | – | 45K | -123K |
| 23:00 | USD | ISM Non-Manufacturing PMI (Jan) | – | 58.6 | 57.7 |
| 23:30 | USD | Crude Oil Inventories | – | 0.430M | -9.910M |
| Thursday – 4th February 2021 | |||||
| 17:30 | GBP | Construction PMI (Jan) | – | 52.9 | 54.6 |
| 20:00 | GBP | BoE Interest Rate Decision (Feb) | – | 0.10% | 0.10% |
| 21:30 | USD | Initial Jobless Claims | – | 830K | 847K |
| Friday – 5th February 2021 | |||||
| 08:30 | AUD | Retail Sales (MoM) (Dec) | – | – | -4.2% |
| 21:30 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 21:30 | USD | Nonfarm Payrolls (Jan) | – | 50K | -140K |
| 21:30 | USD | Unemployment Rate (Jan) | – | 6.7% | 6.7% |
| 21:30 | CAD | Employment Change (Jan) | – | -55.0K | -62.6K |
| 23:00 | CAD | Ivey PMI (Jan) | – | – | 46.7 |